Filed electronically with the Securities and Exchange
Commission on December 30, 1998.
File No. 333-65661
File No. 811-09057
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 / /
Pre-Effective Amendment No. 1 / X /
Post-Effective Amendment No. / /
And
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 1 / X /
KEMPER FUNDS TRUST
------------------
(Exact Name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
--------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
Philip J. Collora, Vice President and Secretary
-----------------------------------------------
Kemper Funds Trust
------------------
222 South Riverside Plaza
-------------------------
Chicago, Illinois 60606
-----------------------
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check
appropriate box):
<TABLE>
<CAPTION>
<S> <C>
/ / Immediately upon filing pursuant to paragraph ( b ) / / days after filing pursuant to paragraph ( a ) ( 1 )
/ / days after filing pursuant to paragraph ( a ) ( 2 ) / / On ( date ) pursuant to paragraph ( b )
/ / On ( date ) pursuant to paragraph ( a ) ( 1 ) / X / On December 31, 1998 pursuant to Rule 461 as filed under
Rule 472.
/ / If Appropriate, check the following box:
This post-effective amendment designates a new effective date for a previously
filed post-effective amendment.
</TABLE>
<PAGE>
LONG TERM
INVESTING
IN A
SHORT TERM
WORLD(SM)
December 30, 1998
Prospectus
Mutual funds:
o are not FDIC-insured
o have no bank guarantees
o may lose value
3 Kemper Equity Funds
Kemper Large Company Growth Fund
Kemper Research Fund
Kemper Small Cap Value+Growth Fund
The Securities and Exchange Commission has not approved
or disapproved these securities or passed upon
the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
THESE FUNDS ARE AVAILABLE ONLY TO SCUDDER KEMPER INVESTMENTS EMPLOYEES IN THE
FOLLOWING STATES: CALIFORNIA, CONNECTICUT, FLORIDA, ILLINOIS, KANSAS,
MASSACHUSETTS, MISSOURI, NEW HAMPSHIRE, NEW JERSEY AND NEW YORK.
<PAGE>
CONTENTS
ABOUT THE FUNDS.........................................................3
Kemper Large Company Growth Fund.....................................3
Kemper Research Fund.................................................8
Kemper Small Cap Value+Growth Fund..................................13
Investment Manager................................................18
ABOUT YOUR INVESTMENT..................................................22
Choosing a share class............................................22
Special features..................................................23
Buying shares.....................................................26
Selling and exchanging shares.....................................30
Distributions and taxes...........................................33
Transaction information..........................................34
2
<PAGE>
ABOUT THE FUNDS
KEMPER LARGE COMPANY GROWTH FUND
Investment objective and strategies
Kemper Large Company Growth Fund seeks long-term growth of capital by investing
primarily in the equity securities of seasoned, financially strong U.S. growth
companies. Growth stocks are stocks of companies with above-average earnings
growth potential. Except as otherwise indicated, the fund's investment objective
and policies may be changed without a vote of shareholders. This fund invests
primarily in common stocks of larger companies that the investment manager
believes have the following attributes:
o a record of above-average growth relative to the overall market (as defined
by the Standard & Poor's 500 Composite Price Index) with prospects for
above-average growth in earnings, cash flow or assets in the future
o important business franchises, leading products or dominant marketing and
distribution systems
o attractive prices relative to potential growth in earnings, cash flow or
assets
o sound finances, high credit standings and profitability
o experienced, motivated management
Principal risks
The fund's principal risks are associated with investing in equity securities,
the stock market in general, and the investment manager's skill in managing the
fund's portfolio:
Stock Market. The fund's returns and net asset value will go up and down, and it
is possible to lose money invested in the fund. Stock market movements will
affect the fund's share prices on a daily basis. Declines are possible both in
the overall stock market or in the types of securities held by the fund.
Inflation Risk. There is a possibility that the rising prices of goods and
services may have the effect of offsetting a fund's real return.
Portfolio Strategy. The portfolio management team's skill in choosing
appropriate investments for the funds will determine in large part the fund's
abilities to achieve its investment objective.
3
<PAGE>
KEMPER LARGE COMPANY GROWTH FUND
Also, share prices of growth funds fluctuate with changes in the stock market.
This characteristic makes growth funds most suitable for the long-term portion
of your portfolio.
Because the fund invests principally in the equity securities of large U.S.
growth companies, the fund may underperform in markets which favor small
capitalization stocks.
There are market and investment risks with any security. The value of an
investment in the fund will fluctuate over time and it is possible to lose money
invested in the fund.
4
<PAGE>
KEMPER LARGE COMPANY GROWTH FUND
Fee and Expense Information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the fund. Each class of shares has a
different set of transaction fees, which will vary based on the length of time
you hold shares in the fund and the amount of your investment. You will find
details about fee discounts and waivers in the Purchase of shares and Special
features sections of this prospectus.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Shareholder fees: Fees paid directly from your investment.
- ---------------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as 5.75% None None
% of offering price)
-------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of None(1) 4%(2) 1%(2)
redemption proceeds)
-------------------------------------------------------------------------------------
Maximum Sales Charge (Load) on Reinvested None None None
Dividends/Distibutions
-------------------------------------------------------------------------------------
Redemption Fee (as % of amount redeemed, if applicable) None None None
-------------------------------------------------------------------------------------
Exchange Fee None None None
-------------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
(2) The contingent deferred sales charges on Class B shares are as follows: 4%
in the first year, 3% in the second and third year, 2% in the fourth and
fifth year, 1% in the sixth year and eliminated thereafter. The contingent
deferred sales charge on Class C shares is 1% during the first year and
eliminated thereafter.
- ---------------------------------------------------------------------------------------
Annual fund operating expenses (Expenses that are deducted from fund assets):
-------------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------
Management Fee 0.70% 0.70% 0.70%
-------------------------------------------------------------------------------------
Distribution (12b-1) Fees None 0.75% 0.75%
-------------------------------------------------------------------------------------
Other Expenses (1) 2.76% 2.94% 2.94%
-------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (2) 3.46% 4.39% 4.39%
-------------------------------------------------------------------------------------
</TABLE>
(1) Other expenses are based on estimated amounts for the fiscal year ending
August 31, 1999. Until further notice, Scudder Fund Accounting Corporation
("SFAC") has agreed to temporarily waive a portion of its fee. Until
further notice, an administrative services fee ("ASF"), which is included
in other expenses, is currently voluntarily waived.
(2) After waiver of the ASF and SFAC fees, total annual fund operating expenses
for Class A, Class B, and Class C would be 1.48%, 2.41%, and 2.41%,
respectively.
5
<PAGE>
KEMPER LARGE COMPANY GROWTH FUND
Example
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
return vary from year to year, and may be higher or lower than those shown. is
hypothetical: actual fund expenses and
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did
not sell your shares:
Class A Class B Class C Class A Class B Class C
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $741 $669 $369 1 Year $741 $269 $269
- -------------------------------------------------------------------------------------
3 Years $1,126 $826 3 Years $1,089 $826 $826
$1,089
- -------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
The fund invests primarily in a diversified portfolio of equity securities of
seasoned, financially strong U.S. growth companies. Although current income is
an incidental consideration, many of the fund's securities should provide
regular dividends which the fund's investment manager expects will grow over
time.
The fund's investment manager utilizes a combination of qualitative and
quantitative research techniques to identify companies that have above-average
quality and growth characteristics and that the investment manager considers to
be selling at attractive market valuations. The investment manager also utilizes
fundamental research to evaluate various aspects of a company's performance,
with a particular focus on consistency of results, long-term growth prospects
and financial strength. The investment manager utilizes quantitative models to
help determine which growth companies offer the best values at a given point in
time.
When assessing financial quality, the investment manager weighs four principal
elements of business risk:
o the investment manager's assessment of the company's balance sheet
o the accounting practices a company follows
o the volatility of a company's earnings over time
o the vulnerability of earnings to changes in external factors, such as the
general economy, the competitive environment, governmental action and
technological change.
6
<PAGE>
KEMPER LARGE COMPANY GROWTH FUND
Under normal market conditions, the fund invests at least 65% of its total
assets in the equity securities of large U.S. growth companies, i.e. those with
a market capitalization of $1 billion or more.
The fund typically sells a stock when its earnings growth potential has become
less favorable, if the stock fails to meet the portfolio management team's
expectations, or due to changes in the market and investment environment.
For temporary defensive or emergency purposes, the fund may invest a portion of
its assets in cash and cash equivalents . Defensive investments should serve to
lessen volatility in an adverse stock market, although they will also generate
lower returns than stocks in most markets. Because this defensive policy differs
from the fund's investment objective, the fund may not achieve its goals during
a defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques which may impact fund performance,
including options, futures and other strategic transactions. The fund is limited
to 5% of net assets for initial margin and premium amounts on futures positions
considered speculative by the Commodities Futures Trading Commission. More
information about investments and strategies is provided in the Statement of
Additional Information. Of course, there can be no guarantee that by following
these strategies, the fund will achieve its objective.
Additional principal risks
An investment in the common stock of a company represents a proportionate
ownership interest in that company. Therefore, the fund participates in the
success or failure of any company in which it holds stock.
Compared to other classes of financial assets, such as bonds or cash
equivalents, common stocks have historically offered the greatest potential for
gain on investment. However, the market value of common stock can fluctuate
significantly, reflecting such things as the business performance of the issuing
company, investors' perceptions of the company or the overall stock market and
general economic or financial market movements.
Because of the flexible nature of the fund's investment policies, the fund may
have a higher portfolio turnover rate than a typical equity mutual fund. A
higher portfolio turnover rate may result in higher expenses to the fund because
of the brokerage expenses associated with increased trading of the fund's
portfolio securities. Higher portfolio turnover (100% or more) may result in the
realization of greater net short-term capital gains. See "Dividends and Taxes"
in the Statement of Additional Information.
7
<PAGE>
KEMPER RESEARCH FUND
Investment objective and strategies
Kemper Research Fund seeks long-term growth of capital by investing primarily in
a diversified portfolio of common stocks. The investment manager generally
diversifies among sectors (i.e. energy, technology, financial, etc.) according
to the weightings of U.S. market benchmarks, such as the Standard & Poor's 500
Composite Price Index or the Morgan Stanley Capital International Index. The
investment manager typically focuses on the common stocks of large U.S. growth
companies, i.e. those with market capitalizations of $1 billion or more. Growth
companies are those with above-average earnings growth potential. Except as
otherwise indicated, the fund's investment objective and policies may be changed
without a vote of shareholders.
The fund focuses on the top research recommendations of the investment manager.
Using in-depth, independent research, the investment manager assigns proprietary
ratings to securities, which the investment manager then selects for the fund's
portfolio based on sector weightings and industry and market forecasts.
Principal risks
The fund's principal risks are associated with investing in equity securities,
the stock market in general, and the investment manager's skill in managing the
fund's portfolio:
Stock Market. The fund's returns and net asset value will go up and down, and it
is possible to lose money invested in the fund. Stock market movements will
affect the fund's share prices on a daily basis. Declines are possible both in
the overall stock market or in the types of securities held by the fund.
Inflation Risk. There is a possibility that the rising prices of goods and
services may have the effect of offsetting a fund's real return.
Portfolio Strategy. The portfolio management team's skill in choosing
appropriate investments for the funds will determine in large part the fund's
abilities to achieve its investment objective.
Because the fund emphasizes the investment manager's top research
recommendations, the fund's performance may rely to a greater extent on the
success of the portfolio management team's stock selection than do funds that
invest in the broader stock market.
8
<PAGE>
KEMPER RESEARCH FUND
Also, share prices of growth funds fluctuate with changes in the stock market.
This characteristic makes growth funds most suitable for the long-term portion
of your portfolio.
There are market and investment risks with any security. The value of an
investment in the fund will fluctuate over time and it is possible to lose money
invested in the fund.
9
<PAGE>
KEMPER RESEARCH FUND
Fee and Expense Information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the fund. Each class of shares has a
different set of transaction fees, which will vary based on the length of time
you hold shares in the fund and the amount of your investment. You will find
details about fee discounts and waivers in the Purchase of shares and Special
features sections of this prospectus.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Shareholder fees: Fees paid directly from your investment.
-------------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as 5.75% None None
% of offering price)
-------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of None(1) 4%2) 1%2)
redemption proceeds)
-------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested None None None
Dividends/Distributions
-------------------------------------------------------------------------------------
Redemption Fee (as % of amount redeemed, if applicable) None None None
-------------------------------------------------------------------------------------
Exchange Fee None None None
-------------------------------------------------------------------------------------
</TABLE>
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and 0.50% during the second year.
(2) The contingent deferred sales charges on Class B shares are as follows: 4%
in the first year, 3% in the second and third year, 2% in the fourth and
fifth year, and 1% in the sixth year. The contingent deferred sales charge
on Class C shares is 1% during the first year.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Annual fund operating expenses (Expenses that are deducted from fund assets):
-------------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Management Fee 0.70% 0.70% 0.70%
-------------------------------------------------------------------------------------
Distribution (12b-1) Fees None 0.75% 0.75%
-------------------------------------------------------------------------------------
Other Expenses (1) 2.76% 2.94% 2.94%
-------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (2) 3.46% 4.39% 4.39%
-------------------------------------------------------------------------------------
</TABLE>
(1) Other expenses are based on estimated amounts for the fiscal year ending
August 31, 1999. Scudder Fund Accounting Corporation ("SFAC") has agreed to
temporarily waive a portion of its fee. Until further notice, an
administrative services fee ("ASF"), which is included in Other Expenses,
is currently voluntarily waived.
(2) After waiver of the ASF and SFAC fees, total annual fund operating expenses
for Class A, Class B, and Class C would be 1.48%, 2.41%, and 2.41%,
respectively.
10
<PAGE>
KEMPER RESEARCH FUND
Example
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell
your shares:
Class A Class B Class C Class A Class B Class C
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $740 $669 $369 1 Year $740 $269 $269
- ----------------------------------------------------------------------------------------
3 Years $1,089 $1,126 $826 3 Years $1,089 $826 $826
- ----------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
The fund invests primarily in a diversified portfolio of common stocks.
Under normal market conditions, the fund invests at least 65% of its total
assets in common stocks of large U.S. growth companies, i.e. those with market
capitalizations of $1 billion or more.
Applying in-depth fundamental research, the fund is managed with a view to
achieving a high rate of total return on investors' capital primarily through
appreciation of its common stock holdings and, to a lesser extent, through
dividend and interest income.
The fund leverages the investment manager's extensive resources by focusing on
the top stock recommendations identified by its large staff of industry research
analysts and other investment specialists. While other growth funds (i.e. funds
that invest in companies with above-average earnings growth potential) hold
these securities as well, this fund focuses particularly on their top
recommendations across all sectors and investment disciplines.
The fund typically sells a stock if its fundamental characteristics change, if
the stock fails to meet the portfolio management team's expectations, or due to
changes in the market and investment environment.
11
<PAGE>
KEMPER RESEARCH FUND
For temporary defensive or emergency purposes, the fund may invest a portion of
its assets in cash and cash equivalents . Defensive investments should serve to
lessen volatility in an adverse stock market, although they also generate lower
returns than stocks in most markets. Because this defensive policy differs from
the fund's investment objective, the fund may not achieve its goals during a
defensive period.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques which may impact fund performance,
including options, futures and other strategic transactions. The fund is limited
to 5% of net assets for initial margin and premium amounts on futures positions
considered speculative by the Commodities Futures Trading Commission. More
information about investments and strategies is provided in the Statement of
Additional Information. Of course, there can be no guarantee that by following
these strategies, the fund will achieve its objective.
Additional principal risks
An investment in the common stock of a company represents a proportionate
ownership interest in that company. Therefore, the fund participates in the
success or failure of any company in which it holds stock.
Compared to other classes of financial assets, such as bonds or cash
equivalents, common stocks have historically offered the greatest potential for
gain on investment. However, the market value of common stock can fluctuate
significantly, reflecting such things as the business performance of the issuing
company, investors' perceptions of the company or the overall stock market and
general economic or financial market movements.
Because of the flexible nature of the fund's investment policies, the fund may
have a higher portfolio turnover rate than a typical equity mutual fund. A
higher portfolio turnover rate may result in higher expenses to the fund because
of the brokerage expenses associated with increased trading of the fund's
portfolio securities. Higher portfolio turnover (100% or more) may result in the
realization of greater net short-term capital gains. See "Dividends and Taxes"
in the Statement of Additional Information.
12
<PAGE>
KEMPER SMALL CAP VALUE+GROWTH FUND
Investment objectives and strategies
Kemper Small Cap Value+Growth Fund seeks long-term capital appreciation by
investing in a diversified portfolio of domestic small company value and growth
stocks. As a secondary objective, by investing in both small company value and
small company growth stocks, the fund seeks to reduce risk associated with
investing in a portfolio of only small company value stocks or small company
growth stocks. Except as otherwise indicated, the fund's investment objectives
and policies may be changed without a vote of shareholders.
Value stocks are stocks which tend to have low price to earnings ratios . The
fund invests in those value stocks which the investment manager believes are
undervalued in relation to their earnings potential. Growth stocks are stocks of
companies with above-average earnings growth potential. Growth stocks in which
the fund invests tend to have high price to earnings ratios but have an earnings
potential which the investment manager believes more than justifies the price.
In considering whether or not to invest in a value or growth stock, the
investment manager considers a number of primarily quantitative factors,
including:
o prospects for growth in sales and earnings in the future
o current prices relative to sales, earnings, cash flow or assets
o financial strength
Principal risks
The fund's principal risks are associated with investing in equity securities,
the stock market in general, and the investment manager's skill in managing the
fund's portfolio:
Stock Market Risk. Each fund's returns and net asset value will go up and down,
and it is possible to lose money invested in the fund. Stock market movements
will affect the fund's share prices on a daily basis. Declines are possible both
in the overall stock market or in the types of securities held by the fund.
Small Company Risk. Small companies can be especially sensitive to market shifts
and isolated business reverses. This is because small companies often serve
niche markets and have limited product lines. They also generally lack the cash
reserves and access to financing that allow larger companies to weather the hard
times. Small companies as a group or individual companies may not perform as
well as expected. Securities of small companies are often thinly traded and
could be harder to value or sell at a fair price.
13
<PAGE>
KEMPER SMALL CAP VALUE+GROWTH FUND
Among the reasons for the greater price volatility of these securities are the
less certain growth prospects of smaller firms, a lower degree of liquidity in
the markets for such stocks compared to larger capitalization stocks, and the
greater sensitivity of small companies to changing economic conditions. In
addition to exhibiting greater volatility, small company stocks may, to a
degree, fluctuate independently of larger company stocks. Small company stocks
may decline in price as large company stock prices rise, or rise in price as
large company stock prices decline. Investors should, therefore, expect that the
share value of the fund may be more volatile than the share value of a fund that
invests in larger capitalization stocks.
Inflation Risk. There is a possibility that the rising prices of goods and
services may have the effect of offsetting a fund's real return.
Portfolio Strategy Risk. The portfolio management team's skill in choosing
appropriate investments for the funds will determine in large part the fund's
abilities to achieve its investment objective.
Growth and Value Investing Risk. Share prices of growth funds fluctuate with
changes in the stock market. This characteristic makes growth funds most
suitable for the long-term portion of your portfolio. Investing in value stocks
involves the subjective determination that a stock is undervalued; the market
may not agree, and a stock's price may not rise to what the portfolio management
team believes is its full value. It may even decrease in value. However, because
of the fund's focus on undervalued stocks of large companies, the fund's
downside risk may be reduced since value stocks are in theory already
underpriced and large company stocks tend to be less volatile than small company
stocks.
The fund's policy of investing in both value and growth stocks of small
capitalization companies may lead it to underperform in a market that
particularly favors value, growth or large capitalization stocks.
General Investment Risk. There are market and investment risks with any
security. The value of an investment in the fund will fluctuate over time and it
is possible to lose money invested in the fund.
An investment in the common stock of a company represents a proportionate
ownership interest in that company. Therefore, the fund participates in the
success or failure of any company in which it holds stock. Compared to other
classes of financial assets, such as bonds or cash equivalents, common stocks
have historically offered the greatest potential for gain on investment.
However, the market value of common stock can fluctuate significantly,
reflecting such things as the business performance of the issuing company,
investors' perceptions of the company or the overall stock market and general
economic or financial market movements.
14
<PAGE>
KEMPER SMALL CAP VALUE+GROWTH FUND
Fee and Expense Information
This information is designed to help you understand the fees and expenses that
you may pay if you buy and hold shares of the fund. Each class of shares has a
different set of transaction fees, which will vary based on the length of time
you hold shares in the fund and the amount of your investment. You will find
details about fee discounts and waivers in the Purchase of shares and Special
features sections of this prospectus.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Shareholder fees: Fees paid directly from your investment.
- ---------------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as % 5.75% None None
of offering price)
-------------------------------------------------------------------------------------
Maximum Deferred Sales Charge (Load) (as % of None(1) 4%(2) 1%(2)
redemption proceeds)
-------------------------------------------------------------------------------------
Maximum Sales Charge (Load) Imposed on Reinvested None None None
Dividends/Distributions
-------------------------------------------------------------------------------------
Redemption Fee (as % of amount redeemed, if applicable) None None None
-------------------------------------------------------------------------------------
Exchange Fee None None None
-------------------------------------------------------------------------------------
(1) The redemption of Class A shares purchased at net asset value under the
Large Order NAV Purchase Privilege may be subject to a contingent deferred
sales charge of 1% during the first year and .50% during the second year.
(2) The contingent deferred sales charges on Class B shares are as follows: 4%
in the first year, 3% in the second and third year, 2% in the fourth and
fifth year, and 1% in the sixth year. The contingent deferred sales charge
on Class C shares is 1% during the first year.
- ---------------------------------------------------------------------------------------
Annual fund operating expenses (Expenses that are deducted from fund assets):
- ---------------------------------------------------------------------------------------
Class A Class B Class C
-------------------------------------------------------------------------------------
Management Fee (1) 0.75% 0.75% 0.75%
-------------------------------------------------------------------------------------
Distribution (12b-1) Fees None 0.75% 0.75%
-------------------------------------------------------------------------------------
Other Expenses (2) 7.66% 7.80% 7.80%
-------------------------------------------------------------------------------------
Total Annual Fund Operating Expenses (3) 8.41% 9.30% 9.30%
-------------------------------------------------------------------------------------
</TABLE>
(1) Until further notice, the Adviser has voluntarily agreed to waive 0.35% of
its Investment Management Fee.
(2) Other expenses are based on estimated amounts for the fiscal year ending
August 31, 1999. Until further notice, Scudder Fund Accounting Corporation
("SFAC") has agreed to temporarily waive a portion of its fee, and Scudder
Kemper Investments, Inc., has agreed to temporarily waive 1.00% of other
expenses. Until further notice, an administrative services fee ("ASF"),
which is included in Other Expenses, is currently voluntarily waived.
(3) After waiver of the management fee, the ASF, SFAC fees and other expenses,
total annual fund operating expenses for Class A, Class B, and Class C
would be 1.63%, 2.52%, and 2.52%, respectively.
15
<PAGE>
KEMPER SMALL CAP VALUE+GROWTH FUND
Example
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds.
This example illustrates the impact of the above fees and expenses on an account
with an initial investment of $10,000, based on the expenses shown above. It
assumes a 5% annual return, the reinvestment of all dividends and distributions
and "annual fund operating expenses" remaining the same each year. The example
is hypothetical: actual fund expenses and return vary from year to year, and may
be higher or lower than those shown.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Fees and expenses if you sold shares after: Fees and expenses if you did not sell
your shares:
Class A Class B Class C Class A Class B Class C
<S> <C> <C> <C> <C> <C> <C> <C>
1 Year $883 $814 $514 1 Year $883 $414 $414
- ----------------------------------------------------------------------------------------
3 Years $1,513 $1,552 $1,252 3 Years $1,513 $1,252 $1,252
- ----------------------------------------------------------------------------------------
</TABLE>
Principal strategies and investments
The fund invests principally in a diversified portfolio of domestic small
company value and small company growth stocks. The investment manager utilizes
quantitative research to identify small companies with above-average return
potential and to determine the allocation between value and growth stocks in the
fund's portfolio. The quantitative research focuses on valuations, earnings
trends, future earnings potential, and a company's financial strength in
determining which securities may be attractive investments. Under normal
circumstances, no more than 75% of the portfolio will be invested in either of
small company value stocks or small company growth stocks. Generally, small
companies are those with market capitalizations of less than $1.5 billion.
Under normal market conditions, the fund invests at least 65% of its total
assets in securities of companies that are similar in size to those comprising
the Russell 2000 Index, an unmanaged capitalization-weighted measure of
approximately 2000 small U.S. stocks. The fund sells securities of companies
that have grown in market capitalization above the maximum of the Russell 2000
Index, as necessary, to keep focused on smaller companies.
The fund typically sells a security if it believes the security has become
unattractive on a valuation basis, earnings trends have deteriorated, the
outlook for future earnings is uncertain, the issuers have grown beyond the
capitalization size in which the fund invests, or the security has not met the
portfolio management team's expectations.
16
<PAGE>
KEMPER SMALL CAP VALUE+GROWTH FUND
Value stocks in which the fund invests tend to have low prices relative to
sales, earnings, cash flow or assets and, in the opinion of the investment
manager, are undervalued relative to their earnings potential. Securities may be
undervalued as a result of overreaction by investors to unfavorable news about a
company, industry or the stock markets in general or as a result of a market
decline, poor economic conditions, or actual or anticipated unfavorable
developments affecting the company. Growth stocks in which the fund invests are
those which the investment manager believes have sustainable, above-average
earnings growth potential.
The fund's principal investments are common stocks traded on the NYSE, AMEX, and
NASDAQ stock markets.
While not principal investments or strategies of the fund, the fund may utilize
other investments and investment techniques which may impact fund performance,
including options, futures and other strategic transactions. The fund is limited
to 5% of net assets for initial margin and premium amounts on futures positions
considered speculative by the Commodities Futures Trading Commission. More
information about investments and strategies is provided in the Statement of
Additional Information. Of course, there can be no guarantee that by following
these strategies, the fund will achieve its objective.
Additional principal risks
An investment in the common stock of a company represents a proportionate
ownership interest in that company. Therefore, the fund participates in the
success or failure of any company in which it holds stock.
Investments in securities of companies with small market capitalizations are
generally considered to offer greater opportunity for appreciation and to
involve greater risks of depreciation than securities of companies with larger
market capitalizations. Since the securities of such companies are not as
broadly traded as those of companies with larger market capitalizations, these
securities are often subject to wider and more abrupt fluctuations in market
price.
Because of the flexible nature of the fund's investment policies, the fund may
have a higher portfolio turnover rate than a typical equity mutual fund. A
higher portfolio turnover rate may result in higher expenses to the fund because
of the brokerage expenses associated with increased trading of the fund's
portfolio securities. Higher portfolio turnover (100% or more) may result in the
realization of greater net short-term capital gains. See "Dividends and Taxes"
in the Statement of Additional Information.
17
<PAGE>
Investment Manager
Each fund retains the investment management firm of Scudder Kemper Investments,
Inc., Two International Place, Boston, MA, to manage its daily investment and
business affairs subject to the policies established by the funds' Board.
Scudder Kemper Investments, Inc. actively manages the funds' investments.
Professional management can be an important advantage for investors who do not
have the time or expertise to invest directly in individual securities. Scudder
Kemper Investments, Inc. is one of the largest and most experienced investment
management organizations worldwide. It manages more than $230 billion in assets
globally for mutual fund investors, retirement and pension plans, institutional
and corporate clients, and private family and individual accounts.
Kemper Research Fund and Kemper Large Company Growth Fund each pays the
investment manager an annual fee as a percentage of the fund's average daily net
assets for providing investment management services, as described in the
following table:
Applicable Assets ($) Annual Fee Rate
0 - 250,000,000 0.70%
250,000,000 - 1,000,000,000 0.67%
1,000,000,000 - 2,500,000,000 0.65%
More than 2,500,000,000 0.63%
Kemper Small Cap Value+Growth Fund pays the investment manager an annual fee as
a percentage of the fund's average daily net assets for providing investment
management services, as described in the following table:
Applicable Assets ($) Annual Fee Rate
0 - 250,000,000 0.75%
250,000,000 - 1,000,000,000 0.72%
1,000,000,000 - 2,500,000,000 0.70%
More than 2,500,000,000 0.68%
18
<PAGE>
Portfolio management
The following investment professionals are associated with the funds as
indicated:
Kemper Large Company Growth Fund
<TABLE>
<CAPTION>
Name & Title Joined the Fund Background
- -----------------------------------------------------------------------------------
<S> <C> <C>
Valerie Malter, December 1998 Joined Scudder Kemper Investments in
Lead Manager 1995 as Product Leader of Quality
Growth Equity. Ms. Malter, who began
her investment career in 1985, has
experience as an analyst covering a
wide range of industries, and, more
recently, portfolio management
experience focusing on stocks of
companies with medium- to large-sized
market capitalizations.
George P. Fraise, December 1998 Joined Scudder Kemper Investments in
Portfolio Manager 1997. Mr. Fraise, who began his
investment career in 1987, has 11
years of industry experience, and has
recent experience as an equity analyst
covering the electical equipment,
machinery, aerospace/defense,
transportation, and pollution control
industries.
Kemper Research Fund
Name & Title Joined the Fund Background
- -----------------------------------------------------------------------------------
Elizabeth D. December 1998 Joined Scudder Kemper Investments in
Smith, 1973. Ms. Smith, who began her
Co-Lead Manager investment career in 1969, has
extensive experience as a research
analyst covering mainframe computers,
household products, software,
aerospace, electrical equipment, and
capital goods companies, is the
product leader for the investment
manager's Research Portfolio product,
and has had portfolio management
experience since 1995.
- -----------------------------------------------------------------------------------
William Truscott, December 1998 Joined Scudder Kemper Investments
Co-Lead Manager in 1992. Mr. Truscott, who began his
investment career in 1983, has recent
experience as a portfolio manager,
equity research analyst, and as the
investment manager's director of
Global Equity Research.
- -----------------------------------------------------------------------------------
19
<PAGE>
Kemper Small Cap Value+Growth Fund
Name & Title Joined the Fund Responsibilities & Background
- -----------------------------------------------------------------------------------
James M. December 1998 Joined Scudder Kemper Investments in
Eysenbach, Lead 1991. Mr. Eysenbach, who began his
Manager investment career in 1984, has more
than 14 years investment management
experience, specializing in
quantitative research, analysis and
portfolio management. Mr. Eysenbach
also served as Director of
Quantitative Services from 1993 to
1997.
Calvin Young, December 1998 Joined Scudder Kemper Investments in
Portfolio Manager 1990. Since 1995, Mr. Young, who began
his investment career in 1988, has
been providing analytical support to
the investment manager's equity
products, and his investment industry
experience has focused on small
companies.
- -----------------------------------------------------------------------------------
</TABLE>
Year 2000 Readiness
Like other mutual funds and financial and business organizations worldwide, the
funds could be adversely affected if computer systems on which a fund relies,
which primarily include those used by the investment manager, its affiliates or
other service providers, are unable to correctly process date-related
information on and after January 1, 2000. This risk is commonly called the Year
2000 Issue. Failure to successfully address the Year 2000 Issue could result in
interruptions to and other material adverse effects on the funds' business and
operations, such as problems with calculating net asset value and difficulties
in implementing a fund's purchase and redemption procedures. The investment
manager has commenced a review of the Year 2000 Issue as it may affect the funds
and is taking steps it believes are reasonably designed to address the Year 2000
Issue, although there can be no assurances that these steps will be sufficient.
In addition, there can be no assurances that the Year 2000 Issue will not have
an adverse effect on the issuers whose securities are held by a fund or on
global markets or economies generally.
20
<PAGE>
Euro Conversion
The planned introduction of a new European currency, the Euro, may result in
uncertainties for European securities in the markets in which they trade and
with respect to the operation of the portfolios. Currently, the Euro is expected
to be introduced on January 1, 1999 by eleven European countries who are members
of the European Economic and Monetary Union (EMU). The introduction of the Euro
will result in the redenomination of European debt and equity securities over a
period of time which may result in various accounting differences and/or tax
treatments which would not otherwise occur. Additional questions are raised by
the fact that certain other EMU members, including the United Kingdom, will not
officially be implementing the Euro on January 1, 1999. If the introduction of
the Euro, or EMU as a whole, does not take place as planned there could be
negative effects such as severe currency fluctuations and market disruptions.
The Adviser is working to address Euro-related issues and understands that other
key service providers are taking similar steps. However, at this time no one
knows precisely what the degree of impact will be. While each of the funds
invests only to a limited extent in foreign securities, to the extent that the
market impact or effect on a portfolio holding is negative, it could hurt a
portfolio's performance.
21
<PAGE>
ABOUT YOUR INVESTMENT
Choosing a share class
Each fund is composed of three classes of shares. All classes of a fund have a
common investment objective and investment portfolio. Each fund provides
investors with the option of purchasing shares in the following ways:
<TABLE>
<S> <C>
Class A Shares Offered at net asset value plus a maximum sales charge of
5.75% of the offering price. Reduced sales charges apply
to purchases of $50,000 or more. Class A shares purchased
at net asset value under the Large Order NAV Purchase
Privilege may be subject to a 1% contingent deferred sales
charge if redeemed within one year of purchase and
a 0.50% contingent deferred sales charge if redeemed
during the second year of purchase.
Class B Shares Offered at net asset value without an initial
sales charge, but subject to a 0.75% Rule 12b-1
distribution fee and a contingent deferred sales charge
that declines from 4% to zero on certain redemptions made
within six years of purchase. Class B shares
automatically convert into Class A shares (which have
lower ongoing expenses) six years after purchase.
Class C Shares Offered at net asset value without an initial
sales charge, but subject to a 0.75% Rule 12b-1
distribution fee and a 1% contingent deferred sales
charge on redemptions made within one year of purchase.
Class C shares do not convert into another class.
</TABLE>
When placing purchase orders, investors must specify whether the order is for
Class A, Class B or Class C shares. Each class of shares represents interests in
the same portfolio of investments of a fund.
The decision as to which class to choose depends on a number of factors,
including the amount and intended length of the investment. Investors that
qualify for reduced sales charges might consider Class A shares. Investors who
prefer not to pay an initial sales charge and who plan to hold their investment
for more than six years might consider Class B shares. Investors who prefer not
to pay an initial sales charge but who plan to redeem their shares within six
years might consider Class C shares. For more information about the three sales
arrangements, consult your financial representative or Kemper Service Company
(the "Shareholder Service Agent"). Be aware that financial services firms may
receive different compensation depending upon which class of shares they sell.
22
<PAGE>
Rule 12b-1 plan
Each fund has adopted a plan under Rule 12b-1 that provides for fees payable as
an expense of the Class B shares and the Class C shares that are used by the
transfer agent to pay for distribution and other services provided to
shareholders of those classes. Because 12b-1 fees are paid out of fund assets on
an ongoing basis, they will, over time, increase the cost of investment and may
cost more than other types of sales charges. Long-term shareholders may pay more
than the economic equivalent of the maximum initial sales charges permitted by
the National Association of Securities Dealers, although Kemper Distributors,
Inc. believes that it is unlikely, in the case of Class B shares, because of the
automatic conversion feature of those shares.
Special features
Class A Shares -- Combined Purchases. Each fund's Class A shares (or the
equivalent) may be purchased at the rate applicable to the discount bracket
attained by combining concurrent investments in Class A shares of the funds
contained in this prospectus or any of the following funds: Kemper Adjustable
Rate U.S. Government Fund, Kemper Aggressive Growth Fund, Kemper Asian Growth
Fund, Kemper Blue Chip Fund, Kemper California Tax-Free Income Fund, Kemper Cash
Reserves Fund, Kemper Contrarian Fund, Kemper Diversified Income Fund, Kemper
Emerging Markets Growth Fund, Kemper Emerging Markets Income Fund, Kemper Europe
Fund, Kemper Florida Tax-Free Income Fund, Kemper Global Blue Chip Fund, Kemper
Global Income Fund, Kemper Growth Fund, Kemper High Yield Fund, Kemper High
Yield Opportunity, Kemper Horizon 10+ Portfolio, Kemper Horizon 20+ Portfolio,
Kemper Horizon 5 Portfolio, Kemper Income And Capital Preservation Fund, Kemper
Intermediate Municipal Bond, Kemper International Fund, Kemper International
Growth and Income Fund, Kemper Large Company Growth Fund (currently available
only to employees of Scudder Kemper Investments, Inc.; not available in all
states), Kemper Latin America Fund, Kemper Municipal Bond Fund, Kemper New York
Tax-Free Income Fund, Kemper Ohio Tax-Free Income Fund, Kemper Quantitative
Equity Fund, Kemper Research Fund (currently available only to employees of
Scudder Kemper Investments, Inc.; not available in all states), Kemper
Retirement Fund -- Series I, Kemper Retirement Fund -- Series II, Kemper
Retirement Fund -- Series III, Kemper Retirement Fund -- Series IV, Kemper
Retirement Fund -- Series V, Kemper Retirement Fund -- Series VI, Kemper
Retirement Fund -- Series VII, Kemper Short-Intermediate Government Fund, Kemper
Small Cap Value Fund, Kemper Small Cap Value+Growth Fund (currently available
only to employees of Scudder Kemper Investments, Inc.; not available in all
states), Kemper Small Capitalization Equity Fund, Kemper Small Cap Relative
Value Fund, Kemper Technology Fund, Kemper Total Return Fund, Kemper U.S.
Government Securities Fund, Kemper U.S. Growth and Income Fund, Kemper U.S.
Mortgage Fund, Kemper Value+Growth Fund, Kemper Worldwide 2004 Fund,
Kemper-Dreman High Return Equity Fund, Kemper-Dreman Financial Services Fund
("Kemper Mutual Funds"). Except as noted below, there is no combined purchase
credit for direct purchases of
23
<PAGE>
shares of Zurich Money Funds, Cash Equivalent Fund, Tax-Exempt California Money
Market Fund, Cash Account Trust, Investors Municipal Cash Fund or Investors Cash
Trust ("Money Market Funds"), which are not considered "Kemper Mutual Funds" for
purposes hereof. For purposes of the Combined Purchases feature described above
as well as for the Letter of Intent and Cumulative Discount features described
below, employer sponsored employee benefit plans using the subaccount record
keeping system made available through Kemper Service Company (the "Shareholder
Service Agent") may include: (a) Money Market Funds as "Kemper Mutual Funds,"
(b) all classes of shares of any Kemper Mutual Fund, and (c) the value of any
other plan investments, such as guaranteed investment contracts and employer
stock, maintained on such subaccount record keeping system.
Class A Shares -- Letter of Intent. The same reduced sales charges for Class A
shares also apply to the aggregate amount of purchases made by any purchaser
within a 24-month period under a written Letter of Intent ("Letter") provided by
Kemper Distributors, Inc. The Letter, which imposes no obligation to purchase or
sell additional Class A shares, provides for a price adjustment depending upon
the actual amount purchased within such period.
Class A Shares -- Cumulative Discount. Class A shares of a fund may also be
purchased at the rate applicable to the discount bracket attained by adding to
the cost of shares of a fund being purchased, the value of all Class A shares of
the above mentioned Kemper Funds (computed at the maximum offering price at the
time of the purchase for which the discount is applicable) already owned by the
investor.
Class A Shares -- Large Order NAV Purchase Privilege. Class A shares of a fund
may also be purchased at net asset value by any purchaser provided that the
amount invested in such fund or other Kemper Mutual Funds totals at least
$1,000,000 including purchases of Class A shares pursuant to the "Combined
Purchases," "Letter of Intent" and "Cumulative Discount" features described
above (the "Large Order NAV Purchase Privilege").
Exchange Privilege -- General. Shareholders of Class A, Class B and Class C
shares may exchange their shares for shares of the corresponding class of Kemper
Mutual Funds. Shares of a Kemper Fund with a value in excess of $1,000,000
(except Kemper Cash Reserves Fund) acquired by exchange from another Kemper
Fund, or from a Money Market Fund, may not be exchanged thereafter until they
have been owned for 15 days (the "15 Day Hold Policy"). For purposes of
determining whether the 15-Day Hold Policy applies to a particular exchange, the
value of the shares to be exchanged shall be computed by aggregating the value
of shares being exchanged for all accounts under common control, direction or
advice, including without limitation accounts administered by a financial
services firm offering market timing, asset allocation or similar services.
24
<PAGE>
For purposes of determining any contingent deferred sales charge that may be
imposed upon the redemption of the shares received on exchange, amounts
exchanged retain their original cost and purchase date.
25
<PAGE>
Buying shares
You may purchase shares of the funds by contacting the securities dealer or
other financial services firm from whom you received this prospectus.
These funds are currently available only to employees of Scudder Kemper
Investments in the following states: California, Connecticut, Florida, Illinois,
Kansas, Massachusetts, Missouri, New Hampshire, New Jersey and New York.
Class A Shares
Public Amount of Purchase Sales Charge Sales Charge
Offering Price as a % of as a % of Net
Including Sales Offering Price* Asset Value**
Charge
Less than $50,000 5.75% 6.10%
$50,000 but less than $100,000 4.50 4.71
$100,000 but less than $250,000 3.50 3.63
$250,000 but less than $500,000 2.60 2.67
$500,000 but less than $1 2.00 2.04
million 0.00*** 0.00***
$1 million and over
*Includes front-end sales load.
**Rounded to the nearest one-hundredth percent.
***Redemption of shares may be subject to a contingent deferred
sales charge as discussed below.
NAV Purchases Class A shares of a fund may be purchased at net asset value
by:
o shareholders in connection with the investment or
reinvestment of income and capital gain dividends
o any purchaser with Kemper Funds investment totals of at
least $1,000,000
o unitholders of unit investment trusts sponsored by Ranson &
Associates, Inc. or its predecessors through reinvestment
programs described in the prospectuses of such trusts that
have such programs
o officers, trustees, directors, employees (including
retirees) and sales representatives of a fund, its
investment manager, its principal underwriter or certain
affiliated companies, for themselves or members of their
families or any trust, pension, profit-sharing or other
benefit plan for such persons
o persons who purchase shares through bank trust departments
that process such trades through an automated, integrated
mutual fund clearing program provided by a third party
clearing firm
o registered representatives and employees of broker-dealers
having selling group agreements with Kemper Distributors or
any trust, pension, profit-sharing or other benefit plan for
such persons
o officers, directors, and employees of service agents of the
funds
26
<PAGE>
Class A Shares (cont.)
o members of the plaintiff class in the proceeding known as
Howard and Audrey Tabankin, et al. v. Kemper Short-Term
Global Income Fund, et. al., Case No. 93 C 5231 (N.D.IL)
o selected employees (including their spouses and dependent
children) of banks and other financial services firms that
provide administrative services related to the funds
pursuant to an agreement with Kemper Distributors or one of
its affiliates
o certain professionals who assist in the promotion of Kemper
Funds pursuant to personal services contracts with Kemper
Distributors, for themselves or members of their families
o in connection with the acquisition of the assets of or
merger or consolidation with another investment company
o shareholders who owned shares of Kemper Value Series, Inc.
("KVS") on September 8, 1995, and have continuously owned
shares of KVS (or a Kemper Fund acquired by exchange of KVS
shares) since that date, for themselves or members of their
families or any trust, pension, profit-sharing or other
benefit plan for such persons
o any trust, pension, profit-sharing or other benefit plan for
only such persons
o persons who purchase shares of the fund through Kemper
Distributors as part of an automated billing and wage
deduction program administered by RewardsPlus of America
o through certain investment advisers registered under the
Investment Advisers Act of 1940 and other financial services
firms, acting solely as agents for their clients, that
adhere to certain standards established by Kemper
Distributors, including a requirement that such shares be
purchased for the benefit of their clients participating in
an investment advisory program or agency commission program
under which such clients pay a fee to the investment adviser
or other firm for portfolio management or agency brokerage
services.
27
<PAGE>
Class A Shares (cont.)
Contingent A contingent deferred sales charge may be imposed upon
Deferred Sales redemption of Class A shares purchased under the Large
Charge Order NAV Purchase Privilege as follows: 1% if they are
redeemed within one year of purchase and 0.50% if redeemed
during the second year following purchase. The charge will
not be imposed upon redemption of reinvested dividends or
share appreciation. The charge is applied to the value of
the shares redeemed, excluding amounts not subject to the
charge. The contingent deferred sales charge will be waived
in the event of:
o redemptions under a fund's Systematic Withdrawal Plan at a
maximum of 10% per year of the net asset value of the
account
o redemption of shares of a shareholder (including a
registered joint owner) who has died
o redemption of shares of a shareholder (including a
registered joint owner) who after purchase of the shares
being redeemed becomes totally disabled (as evidenced by a
determination by the federal Social Security Administration)
o redemptions of shares whose dealer of record at the time of
the investment notifies Kemper Distributors that the dealer
waives the commission applicable to such Large Order NAV
Purchase.
Distribution None
Fee
Exchange Class A shares may be exchanged for each other at their relative
Privilege net asset values. Shares of Money Market Funds and Kemper Cash
Reserves Fund acquired by purchase (not including shares acquired
by dividend reinvestment) are subject to the applicable sales
charge on exchange. Class A shares purchased under the Large
Order NAV Purchase Privilege may be exchanged for Class A shares
of any Kemper Fund or a Money Market Fund without paying any
contingent deferred sales charge. If the Class A shares received
on exchange are redeemed thereafter, a contingent deferred sales
charge may be imposed.
28
<PAGE>
Class B Shares
Public Offering Net asset value per share without any sales charge at the
Price time of purchase
Contingent A contingent deferred sales charge may be imposed upon
Deferred Sales redemption of Class B shares. There is no such charge upon
Charge redemption of any share appreciation or reinvested
dividends. The charge is computed at the following rates
applied to the value of the shares redeemed excluding
amounts not subject to the charge.
Year of Redemption First Second Third Fourth Fifth Sixth
After Purchase:
---------------------------------------------------------------
Contingent Deferred 4% 3% 3% 2% 2% 1%
Sales Charge:
--------------------------------------------------------------
The contingent deferred sales charge will be waived:
o for redemptions to satisfy required minimum distributions
after age 70 1/2 from an IRA account (with the maximum
amount subject to this waiver being based only upon the
shareholder's Kemper IRA accounts)
o for redemptions made pursuant to any IRA systematic
withdrawal based on the shareholder's life expectancy
including, but not limited to, substantially equal periodic
payments described in Code Section 72(t)(2)(A)(iv) prior to
age 59 1/2
o for redemptions made pursuant to a systematic withdrawal
plan (see "Special Features -- Systematic Withdrawal Plan"
below)
o in the event of the total disability (as evidenced by a
determination by the federal Social Security Administration)
of the shareholder (including a registered joint owner)
occurring after the purchase of the shares being redeemed
o in the event of the death of the shareholder (including a
registered joint owner) .
Distribution Fee 0.75%
Conversion Class B shares of a fund will automatically convert to Class A
Feature shares of the same fund six years after issuance on the basis
of the relative net asset value per share. Shares purchased
through the reinvestment of dividends and other distributions
paid with respect to Class B shares in a shareholder's fund
account will be converted to Class A shares on a pro rata basis.
Exchange Class B shares of a fund and Class B shares of most Kemper Funds
Privilege may be exchanged for each other at their relative net asset
values without a contingent deferred sales charge.
29
<PAGE>
Class C Shares
Public Net asset value per share without any sales charge at the
Offering time of purchase
Price
Contingent A contingent deferred sales charge of 1% may be imposed upon
Deferred redemption of Class C shares redeemed within one year of
Sales Charge purchase. The charge will not be imposed upon redemption of
reinvested dividends or share appreciation. The contingent
deferred sales charge will be waived in the event of:
o redemption of shares of a shareholder (including a
registered joint owner) who has died
o redemption of shares of a shareholder (including a
registered joint owner) who after purchase of the shares
being redeemed becomes totally disabled (as evidenced by a
determination by the federal Social Security Administration)
o redemptions under a fund's Systematic Withdrawal Plan at a
maximum of 10% per year of the net asset value of the
account
o redemption of shares purchased through a dealer-sponsored
asset allocation program maintained on an omnibus
record-keeping system provided the dealer of record has
waived the advance of the first year administrative services
and distribution fees applicable to such shares and has
agreed to receive such fees quarterly.
Distribution Fee 0.75%
Conversion Feature None
Exchange Privilege Class C shares of a fund and Class C shares of
most Kemper Funds may be exchanged for each other at their
relative net asset values. Class C shares may be exchanged
without a contingent deferred sales charge.
Selling and exchanging shares
General
Contact your securities dealer or other financial services firm to arrange for
share redemptions or exchanges.
Any shareholder may require a fund to redeem his or her shares. When shares are
held for the account of a shareholder by the funds' transfer agent, the
shareholder may redeem them by sending a written request with signatures
guaranteed to Kemper Mutual Funds, Attention: Redemption Department, P.O. Box
419557, Kansas City, Missouri 64141-6557.
An exchange of shares entails the sale of fund shares and subsequent purchase of
shares of another Kemper Mutual Fund.
30
<PAGE>
Share certificates
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. 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 (prior to the imposition of any contingent
deferred sales charge) 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 and guardian account holders, provided the trustee, executor or
guardian is named in the account registration. Other institutional account
holders and guardian account holders of custodial accounts for gifts and
transfers to minors 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 described under "General" above, 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.
Telephone requests may be made by calling 1-800-621-1048. Shares purchased by
check or through EXPRESS-Transfer or Bank Direct Deposit 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 certificated 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 contact the Shareholder Service
Agent by telephone, it may be difficult to use the telephone redemption
privilege, although investors can still redeem by mail. The Funds reserve the
right to terminate or modify this privilege at any time.
31
<PAGE>
Repurchases
A request for repurchase may be communicated by a shareholder through a
securities dealer or other financial services firm to Kemper Distributors, which
each fund has authorized to act as its agent. There is no charge by Kemper
Distributors with respect to repurchases; however, dealers or other firms may
charge customary commissions for their services. The offer to repurchase may be
suspended at any time. Requirements as to stock powers, certificates, payments
and delay of payments are the same as for redemptions.
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 of a Fund can be redeemed
and proceeds sent by federal wire transfer to a single previously designated
account. Requests received by the Shareholder Service Agent prior to the
determination of net asset value will result in shares being redeemed that day
at the net asset value of a class of a Fund effective on that day and normally
the proceeds will be sent to the designated account the following business day,
subject to a fund's redemption policy set forth in "Redemption in-Kind." Once
authorization is on file, the Shareholder Service Agent will honor requests by
telephone at 1-800-621-1048 or in writing, subject to the limitations on
liability described under "General" above. The Funds are not responsible for the
efficiency of the federal wire system or the account holder's financial services
firm or bank. The Funds currently do 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
(including any contingent deferred sales charge). 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 the Fund were purchased. Shares
purchased by check or through EXPRESS-Transfer or Bank Direct Deposit may not be
redeemed by wire transfer until such shares have been owned for at least 10
days. Account holders may not use this privilege to redeem shares held in
certificated form. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the expedited
redemption privilege. The Funds reserve the right to terminate or modify this
privilege at any time.
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Reinvestment privilege
Under certain circumstances, a shareholder who has redeemed Class A shares may
reinvest up to the full amount redeemed at net asset value at the time of the
reinvestment. These reinvested shares will retain their original cost and
purchase date for purposes of the contingent deferred sales charge. Also, a
holder of Class B shares who has redeemed shares may reinvest up to the full
amount redeemed, less any applicable contingent deferred sales charge that may
have been imposed upon the redemption of such shares, at net asset value in
Class A shares. The reinvestment privilege may be terminated or modified at any
time. The reinvestment privilege can be used only once as to any specific shares
and reinvestment must be effected within six months of the redemption.
Distributions and taxes
Dividends and capital gains distributions
The funds normally distribute annual dividends of net investment income. Each
fund distributes any net realized short-term and long-term capital gains at
least annually.
Income and capital gains dividends, if any, of a fund will be credited to
shareholder accounts in full and fractional shares of the same class of that
fund at net asset value on the reinvestment date, except that, upon written
request to the Shareholder Service Agent, a shareholder may select one of the
following options:
(1) To receive income and short-term capital gains dividends in cash and
long-term capital gains dividends in shares of the same class at net asset
value; or
(2) To receive income and capital gains dividends in cash.
Any dividends of a fund that are reinvested will normally be reinvested in
shares of the same class of that same fund. However, by writing to the
Shareholder Service Agent, you may choose to have dividends of a fund invested
in shares of the same class of another Kemper fund at the net asset value of
that class and fund. To use this privilege, you must maintain a minimum account
value of $1,000 in the fund distributing the dividends. The funds will reinvest
dividend checks (and future dividends) in shares of that same fund and class if
checks are returned as undeliverable. Dividends and other distributions in the
aggregate amount of $10 or less are automatically reinvested in shares of the
same fund unless you request that such policy not be applied to your account.
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<PAGE>
Taxes
Generally, dividends from net investment income are taxable to you as ordinary
income. Long-term capital gains distributions, if any, are taxable to you as
long-term capital gains, regardless of how long you have owned your shares.
Short-term capital gains and any other taxable income distributions are taxable
to you as ordinary income. A portion of dividends from ordinary income may
qualify for the dividends-received deduction for corporations.
Any dividends or capital gains distributions declared in October, November or
December with a record date in such month and paid during the following January
are taxable to you as if paid on December 31 of the calendar year in which they
were declared.
A sale or exchange of your shares is a taxable event and may result in a capital
gain or loss which may be long-term or short-term, generally, depending on how
long you owned the shares.
A dividend received by you shortly after the purchase of shares reduces the net
asset value of the shares by the amount of the dividend and, although in effect
a return of capital, is taxable to you.
Each fund sends you detailed tax information about the amount and type of its
distributions by January 31 of the following year.
Each fund may be required to withhold U.S. federal income tax at the rate of 31%
of all taxable distributions payable to you if you fail to provide the fund with
your correct taxpayer identification number or to make required certifications,
or if you have been notified by the Internal Revenue Service that you are
subject to backup withholding. Any such withheld amounts may be credited against
your U.S. federal income tax liability.
You may also be subject to state, local and foreign taxes on fund distributions
and dispositions of fund shares. You should consult your tax advisor regarding
the particular tax consequences of an investment in a fund.
Transaction information
Share price
Scudder Fund Accounting Corporation determines the net asset value per share of
the funds as of the close of regular trading on the New York Stock Exchange,
normally 4 p.m. eastern time, on each day the New York Stock Exchange is open
for trading. Market prices, independent pricing services that use prices
provided by market makers or estimates of market values obtained from yield data
relating to instruments or securities with similar characteristics are used to
determine the value of the funds' assets. If market prices are not readily
available for a security or if a security's price
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<PAGE>
is not considered to be market indicative, that security may be valued by
another method that the Board or its delegate believes accurately reflects fair
value. In those circumstances where a security's price is not considered to be
market indicative, the security's valuation may differ from an available market
quotation.
The net asset value per share of each fund is the value of one share and is
determined separately for each class by dividing the value of a fund's net
assets attributable to that class, less all liabilities, by the number of shares
of that class outstanding. The per share net asset value of the Class B and
Class C shares of a fund will generally be lower than that of the Class A shares
of the fund because of the higher annual expenses borne by the Class B and Class
C shares.
Processing time
All requests to buy and sell shares that are received in good order by the
funds' transfer agent by the close of regular trading on the New York Stock
Exchange are executed at the net asset value per share calculated at the close
of trading that day (subject to any applicable sales load or contingent deferred
sales charge). Orders received by dealers or other financial services firms
prior to the determination of net asset value and received by the funds'
transfer agent prior to the close of its business day will be confirmed at a
price based on the net asset value effective on that day. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
before shares will be purchased.
Payment for shares you sell will be made in cash as promptly as practicable but
in no event later than seven days after receipt of a properly executed request.
If you have share certificates, these must accompany your order in proper form
for transfer. When you place an order to sell shares for which the fund may not
yet have received good payment (i.e., purchases by check, EXPRESS-Transfer or
Bank Direct Deposit), the fund may delay transmittal of the proceeds until it
has determined that collected funds have been received for the purchase of such
shares. This may be up to 10 days from receipt by a fund of the purchase amount.
The redemption of shares within certain time periods may be subject to
contingent deferred sales charges, as noted above.
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<PAGE>
Signature guarantees
A signature guarantee is required unless you sell $50,000 or less worth of
shares or when the proceeds are to be payable to or sent to someone other than
the shareholder of record at the address of record. You can obtain a guarantee
from most brokerage houses and financial institutions, although not from a
notary public. The funds will normally send you the proceeds within one business
day following your request, but may take up to seven business days (or longer in
the case of shares recently purchased by check).
Purchase restrictions
Purchases and sales should be made for long-term investment purposes only. The
funds and their transfer agent each reserves the right to reject purchases of
fund shares (including exchanges) for any reason, including when there is
evidence of a pattern of frequent purchases and sales made in response to
short-term fluctuations in a fund's share price. The funds reserve the right to
withdraw all or any part of the offering made by this prospectus and to reject
purchase orders. Also, from time to time, each fund may temporarily suspend the
offering of its shares or a class of its shares to new investors. During the
period of such suspension, persons who are already shareholders normally are
permitted to continue to purchase additional shares and to have dividends
reinvested.
Minimum balances
The minimum initial investment for each fund is $1,000 and the minimum
subsequent investment is $100. The minimum initial investment for an Individual
Retirement Account is $250 and the minimum subsequent investment is $50. Under
an automatic investment plan, such as Bank Direct Deposit, Payroll Direct
Deposit or Government Direct Deposit, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion.
Because of the high cost of maintaining small accounts, the funds may assess a
quarterly fee of $9 on an account with a balance below $1,000 for the quarter.
The fee will not apply to accounts enrolled in an automatic investment program,
Individual Retirement Accounts or employer sponsored employee benefit plans
using the subaccount record keeping system made available through the
Shareholder Service Agent.
Third party transactions
If you buy and sell shares of a fund through a member of the National
Association of Securities Dealers, Inc. (other than the funds' distributor,
Kemper Distributors), that member may charge a fee for that service. This
prospectus should be read in connection with such firms' material regarding
their fees and services.
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<PAGE>
Redemption-in-kind
The funds reserve the right to honor any request for redemption or repurchase
order by making payment in whole or in part in readily marketable securities
("redemptions in kind"). These securities will be chosen by the fund and valued
as they are for purposes of computing the fund's net asset value. A shareholder
may incur transaction expenses in converting these securities to cash.
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<PAGE>
Additional information about the funds may be found in the Statement of
Additional Information, the Shareholder Service Guide and in shareholder
reports. Shareholder inquiries can be made by calling the toll-free telephone
number listed below. The Statement of Additional Information contains more
information on fund investments and operations. The Shareholder Service Guide
contains more information about purchases and sales of fund shares. The
semiannual and annual shareholder reports, when available, will contain a
discussion of the market conditions and the investment strategies that
significantly affected the funds' performance during the last fiscal year, as
well as a listing of portfolio holdings and financial statements. These and
other fund documents may be obtained without charge from the following sources:
---------------------------------------------------------------------------
By Phone: In Person:
---------------------------------------------------------------------------
Call Kemper at: Public Reference Room
1-800-621-1048 Securities and Exchange Commission,
Washington, D.C.
(Call 1-800-SEC-0330
for more information).
---------------------------------------------------------------------------
By Mail: By Internet:
---------------------------------------------------------------------------
Kemper Distributors, Inc. http://www.sec.gov
222 South Riverside Plaza http://www.kemper.com
Chicago, IL 60606-5808
Or
Public Reference Section, Securities
and Exchange Commission, Washington,
D.C. 20549-6009
(a duplication fee is charged)
---------------------------------------------------------------------------
The Statement of Additional Information is incorporated by reference into this
prospectus (is legally a part of this prospectus).
Investment Company Act file number: 811-09057
Printed with SOYINK Printed on recycled paper
xx-xx-xx
(codes)
38
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
December 30, 1998
Kemper Large Company Growth Fund
Kemper Research Fund
Kemper Small Cap Value+Growth Fund
222 South Riverside Plaza, Chicago, Illinois 60606
1-800-621-1048
This Statement of Additional Information is not a prospectus. It is the
Statement of Additional Information for the funds listed above (the "Funds"). It
should be read in conjunction with the prospectus of the Funds dated December
30, 1998. The prospectus may be obtained without charge from the Funds at the
address or telephone number on this cover or from the firm from which this
Statement of Additional Information was obtained.
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS........................................................2
INVESTMENT POLICIES AND TECHNIQUES.............................................3
PORTFOLIO TRANSACTIONS........................................................14
BROKERAGE COMMISSIONS.........................................................14
INVESTMENT MANAGER AND UNDERWRITER............................................15
PURCHASE AND REDEMPTION OF SHARES.............................................18
ADDITIONAL TRANSACTION INFORMATION............................................19
DIVIDENDS AND TAXES...........................................................21
NET ASSET VALUE...............................................................25
PERFORMANCE .................................................................27
OFFICERS AND TRUSTEES.........................................................29
SHAREHOLDER RIGHTS............................................................31
Scudder Kemper Investments, Inc. acts as the Funds' investment manager.
KFIF-13 12/97 printed on recycled paper
<PAGE>
INVESTMENT RESTRICTIONS
The Funds have adopted certain fundamental investment restrictions which cannot
be changed without approval of a majority of each Fund's outstanding voting
shares. As defined in the Investment Company Act of 1940 (the "1940 Act"), this
means the lesser of the vote of (a) 67% of the shares of a Fund present at a
meeting where more than 50% of the outstanding shares are present in person or
by proxy or (b) more than 50% of the outstanding shares of the Fund.
Except as otherwise indicated, each Fund's investment objective and policies are
not fundamental and may be changed without a vote of shareholders. If there is a
change in investment objective, shareholders should consider whether a Fund
remains an appropriate investment in light of their then current financial
position and needs. There can be no assurance that each Fund's objective will be
met.
As a matter of fundamental policy, each Fund has elected to be classified as a
diversified series of a registered open-end management investment company.
Each Fund may not, as a fundamental policy:
(a) 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;
(b) 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;
(c) purchase physical commodities or contracts relating to physical
commodities;
(d) 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;
(e) purchase or sell real estate, which term 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;
(f) 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; and
(g) concentrate its investments in a particular industry, as that 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.
Each Fund may not, as a non-fundamental policy which may be changed by the
Trustees without a vote of shareholders:
(1) invest more than 15% of the value of its net assets in illiquid
securities.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation.
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INVESTMENT POLICIES AND TECHNIQUES
General. Each Fund is a diversified series of shares of beneficial interest of
Kemper Funds Trust (the "Trust"), an open-end management investment company.
There is no assurance that the investment objective of any Fund will be achieved
and investment in each Fund includes risks that vary in kind and degree
depending upon the investment policies of that Fund. The returns and net asset
value of each Fund will fluctuate.
Common Stocks. Under normal circumstances, each Fund invests primarily in common
stocks. Common stock is issued by companies to raise cash for business purposes
and represents a proportionate interest in the issuing companies. Therefore,
each Fund participates in the success or failure of any company in which it
holds stock. The market values of common stock can fluctuate significantly,
reflecting the business performance of the issuing company, investor perception
and general economic and financial market movements. Despite the risk of price
volatility, however, common stocks have traditionally offered the greatest
potential for gain on investment, compared to other classes of financial assets
such as bonds or cash equivalents.
Warrants. Each Fund may invest in warrants up to 5% of the value of its total
assets. The holder of a warrant has the right, until the warrant expires, to
purchase a given number of shares of a particular issuer at a specified price.
Such investments can provide a greater potential for profit or loss than an
equivalent investment in the underlying security. Prices of warrants do not
necessarily move, however, in tandem with the prices of the underlying
securities and are, therefore, considered speculative investments. Warrants pay
no dividends and confer no rights other than a purchase option. Thus, if a
warrant held by a Fund were not exercised by the date of its expiration, the
Fund would lose the entire purchase price of the warrant.
Convertible Securities. Each of the Funds may invest in convertible securities,
that is, bonds, notes, debentures, preferred stocks and other securities which
are convertible into common stock. Investments in convertible securities can
provide an opportunity for capital appreciation and/or income through interest
and dividend payments by virtue of their conversion or exchange features.
The convertible securities in which a Fund may invest are either fixed income or
zero coupon debt securities which may be converted or exchanged at a stated or
determinable exchange ratio into underlying shares of common stock. The exchange
ratio for any particular convertible security may be adjusted from time to time
due to stock splits, dividends, spin-offs, other corporate distributions or
scheduled changes in the exchange ratio. Convertible debt securities and
convertible preferred stocks, until converted, have general characteristics
similar to both debt and equity securities. Although to a lesser extent than
with debt securities generally, the market value of convertible securities tends
to decline as interest rates increase and, conversely, tends to increase as
interest rates decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities typically changes as the
market value of the underlying common stocks changes, and, therefore, also tends
to follow movements in the general market for equity securities. A unique
feature of convertible securities is that as the market price of the underlying
common stock declines, convertible securities tend to trade increasingly on a
yield basis, and so may not experience market value declines to the same extent
as the underlying common stock. When the market price of the underlying common
stock increases, the prices of the convertible securities tend to rise as a
reflection of the value of the underlying common stock, although typically not
as much as the underlying common stock. While no securities investments are
without risk, investments in convertible securities generally entail less risk
than investments in common stock of the same issuer.
As debt securities, convertible securities are investments which provide for a
stream of income (or in the case of zero coupon securities, accretion of income)
with generally higher yields than common stocks. Of course, like all debt
securities, there can be no assurance of income or principal payments because
the issuers of the convertible securities may default on their obligations.
Convertible securities generally offer lower yields than non-convertible
securities of similar quality because of their conversion or exchange features.
Repurchase Agreements. Each of the Funds may enter into repurchase
agreements with member banks of the Federal Reserve System, any foreign bank, if
the repurchase agreement is fully secured by government securities of the
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<PAGE>
particular foreign jurisdiction, or with any domestic or foreign broker/dealer
which is recognized as a reporting government securities dealer if the
creditworthiness of the bank or broker/dealer has been determined by the Adviser
to be at least as high as that of other obligations the relevant Fund may
purchase, or to be at least equal to that of issuers of commercial paper rated
within the two highest grades assigned by Moody's or S&P.
A repurchase agreement provides a means for a Fund to earn income on assets for
periods as short as overnight. It is an arrangement under which the purchaser
(i.e., the Fund) acquires a security ("Obligation") and the seller agrees, at
the time of sale, to repurchase the Obligation at a specified time and price.
Securities subject to a repurchase agreement are held in a segregated account
and the value of such securities kept at least equal to the repurchase price on
a daily basis. The repurchase price may be higher than the purchase price, the
difference being income to the Fund, or the purchase and repurchase prices may
be the same, with interest at a stated rate due to the Fund together with the
repurchase price upon repurchase. In either case, the income to a Fund is
unrelated to the interest rate on the Obligation itself. Obligations will be
held by the Custodian or in the Federal Reserve Book Entry system.
For purposes of the 1940 Act, a repurchase agreement is deemed to be a loan from
a Fund to the seller of the Obligation subject to the repurchase agreement and
is therefore subject to that Fund's investment restriction applicable to loans.
It is not clear whether a court would consider the Obligation purchased by a
Fund subject to a repurchase agreement as being owned by a Fund or as being
collateral for a loan by the Fund to the seller. In the event of the
commencement of bankruptcy or insolvency proceedings with respect to the seller
of the Obligation before repurchase of the Obligation under a repurchase
agreement, a Fund may encounter delay and incur costs before being able to sell
the security. Delays may involve loss of interest or decline in price of the
Obligation. If the court characterizes the transaction as a loan and the Fund
has not perfected a security interest in the Obligation, the Fund may be
required to return the Obligation to the seller's estate and be treated as an
unsecured creditor of the seller. As an unsecured creditor, a Fund would be at
risk of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt instrument purchased for a Fund, the
Adviser seeks to minimize the risk of loss through repurchase agreements by
analyzing the creditworthiness of the obligor, in this case the seller of the
Obligation. Apart from the risk of bankruptcy or insolvency proceedings, there
is also the risk that the seller may fail to repurchase the Obligation, in which
case a Fund may incur a loss if the proceeds to a Fund of the sale to a third
party are less than the repurchase price. However, if the market value of the
Obligation subject to the repurchase agreement becomes less than the repurchase
price (including interest), a Fund will direct the seller of the Obligation to
deliver additional securities so that the market value of all securities subject
to the repurchase agreement will equal or exceed the repurchase price. It is
possible that a Fund will be unsuccessful in seeking to impose on the seller a
contractual obligation to deliver additional securities.
Foreign Securities. Each of the Funds may invest in foreign securities. The
Adviser believes that diversification of assets on an international basis
decreases the degree to which events in any one country, including the U.S.,
will affect an investor's entire investment holdings. In certain periods since
World War II, many leading foreign economies and foreign stock market indices
have grown more rapidly than the U.S. economy and leading U.S. stock market
indices, although there can be no assurance that this will be true in the
future. Investors should recognize that investing in foreign securities involves
certain special considerations, including those set forth below, which are not
typically associated with investing in U.S. securities and which may favorably
or unfavorably affect a Fund's performance. As foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, practices and requirements comparable to those applicable to domestic
companies, there may be less publicly available information about a foreign
company than about a domestic company. Many foreign securities markets, while
growing in volume of trading activity, have substantially less volume than the
U.S. market, and securities of some foreign issuers are less liquid and more
volatile than securities of domestic issuers. Similarly, volume and liquidity in
most foreign bond markets is less than in the U.S. and, at times, volatility of
price can be greater than in the U.S. Fixed commissions on some foreign
securities exchanges and bid to asked spreads in foreign bond markets are
generally higher than commissions or bid to asked spreads on U.S. markets,
although a Fund will endeavor to achieve the most favorable net results on its
portfolio transactions. There is generally less government supervision and
regulation of securities exchanges, brokers and listed companies than in the
U.S. It may be more difficult for a Fund's agents to keep currently informed
about corporate actions which may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than
within the U.S., thus increasing the risk of delayed settlements of portfolio
transactions or loss of certificates for portfolio securities. Payment for
securities without delivery may be required in certain foreign markets. In
addition, with respect to certain foreign countries, there is the possibility of
expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in those countries.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as
4
<PAGE>
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position. The management of a
Fund seeks to mitigate the risks associated with the foregoing considerations
through continuous professional management.
The planned introduction of a new European currency, the Euro, may result in
uncertainties for European securities in the markets in which they trade and
with respect to the operation of the portfolios. Currently, the Euro is expected
to be introduced on January 1, 1999 by eleven European countries who are members
of the European Economic and Monetary Union (EMU). The introduction of the Euro
will result in the redenomination of European debt and equity securities over a
period of time which may result in various accounting differences and/or tax
treatments which would not otherwise occur. Additional questions are raised by
the fact that certain other EMU members, including the United Kingdom, will not
officially be implementing the Euro on January 1, 1999. If the introduction of
the Euro, or EMU as a whole, does not take place as planned there could be
negative effects such as severe currency fluctuations and market disruptions.
Foreign Currencies. Because investments in foreign securities usually will
involve currencies of foreign countries, and because the Funds may hold foreign
currencies and forward contracts, futures contracts and options on foreign
currencies and foreign currency futures contracts, the value of the assets of a
Fund as measured in U.S. dollars may be affected favorably or unfavorably by
changes in foreign currency exchange rates and exchange control regulations, and
a Fund may incur costs in connection with conversions between various
currencies. Although a Fund values its assets daily in terms of U.S. dollars, it
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. It will do so from time to time, and investors should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a Fund at one
rate, while offering a lesser rate of exchange should a Fund desire to resell
that currency to the dealer. A Fund will conduct its foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or through entering into options or
forward or futures contracts to purchase or sell foreign currencies.
Borrowing. As a matter of fundamental policy, the Funds will not borrow money,
except as permitted under the 1940 Act, as amended, and as interpreted or
modified by regulatory authority having jurisdiction, from time to time. While
the Funds do not currently intend to borrow for investment leverage purposes, if
such a strategy were implemented in the future it would increase a Fund's
volatility and the risk of loss in a declining market. Borrowing by the Funds
will involve special risk considerations. Although the principal of a Fund's
borrowing will be fixed, a Fund's assets may change in value during the time a
borrowing is outstanding, thus increasing exposure to capital risk.
Reverse Repurchase Agreements. Each Fund may enter into "reverse repurchase
agreements," which are repurchase agreements in which the Fund, as the seller of
the securities, agrees to repurchase them at an agreed time and price. Each Fund
maintains a segregated account in connection with outstanding reverse repurchase
agreements. A Fund will enter into reverse repurchase agreements only when the
Adviser believes that the interest income to be earned from the investment of
the proceeds of the transaction will be greater than the interest expense of the
transaction.
Lending of Portfolio Securities. Each Fund may seek to increase its income by
lending portfolio securities. Such loans may be made to registered
broker/dealers, and are required to be secured continuously by collateral in
cash, U.S. Government securities and high grade debt obligations, maintained on
a current basis at an amount at least equal to the market value and accrued
interest of the securities loaned. A Fund has the right to call a loan and
obtain the securities loaned on no more than five days' notice. During the
existence of a loan, a Fund continues to receive the equivalent of any
distributions paid by the issuer on the securities loaned and also receives
compensation based on investment of the collateral. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail financially. However, the
loans may be made only to firms deemed by the Adviser to be of good standing.
Indexed Securities. The Funds may invest in indexed securities, the value of
which is linked to currencies, interest rates, commodities, indices or other
financial indicators ("reference instruments"). Most indexed securities have
maturities of three years or less.
Indexed securities differ from other types of debt securities in which a Fund
may invest in several respects. First, the interest rate or, unlike other debt
securities, the principal amount payable at maturity of an indexed security may
vary based on changes in one or more specified reference instruments, such as an
interest rate compared with a fixed interest rate or the
5
<PAGE>
currency exchange rates between two currencies (neither of which need be the
currency in which the instrument is denominated). The reference instrument need
not be related to the terms of the indexed security. For example, the principal
amount of a U.S. dollar denominated indexed security may vary based on the
exchange rate of two foreign currencies. An indexed security may be positively
or negatively indexed; that is, its value may increase or decrease if the value
of the reference instrument increases. Further, the change in the principal
amount payable or the interest rate of an indexed security may be a multiple of
the percentage change (positive or negative) in the value of the underlying
reference instrument(s).
Investment in indexed securities involves certain risks. In addition to the
credit risk of the security's issuer and the normal risks of price changes in
response to changes in interest rates, the principal amount of indexed
securities may decrease as a result of changes in the value of reference
instruments. Further, in the case of certain indexed securities in which the
interest rate is linked to a reference instrument, the interest rate may be
reduced to zero, and any further declines in the value of the security may then
reduce the principal amount payable on maturity. Finally, indexed securities may
be more volatile than the reference instruments underlying indexed securities.
Real Estate Investment Trusts ("REITs"). Each of the Funds may invest in REITs.
REITs are sometimes informally characterized as equity REITs, mortgage REITs and
hybrid REITs. Investment in REITs may subject a Fund to risks associated with
the direct ownership of real estate, such as decreases in real estate values,
overbuilding, increased competition and other risks related to local or general
economic conditions, increases in operating costs and property taxes, changes in
zoning laws, casualty or condemnation losses, possible environmental
liabilities, regulatory limitations on rent and fluctuations in rental income.
Equity REITs generally experience these risks directly through fee or leasehold
interests, whereas mortgage REITs generally experience these risks indirectly
through mortgage interests, unless the mortgage REIT forecloses on the
underlying real estate. Changes in interest rates may also affect the value of a
Fund's investment in REITs. For instance, during periods of declining interest
rates, certain mortgage REITs may hold mortgages that the mortgagors elect to
prepay, which prepayment may diminish the yield on securities issued by those
REITs.
Certain REITs have relatively small market capitalizations, which may tend to
increase the volatility of the market price of their securities. Furthermore,
REITs are dependent upon specialized management skills, have limited
diversification and are, therefore, subject to risks inherent in operating and
financing a limited number of projects. REITs are also subject to heavy cash
flow dependency, defaults by borrowers and the possibility of failing to qualify
for tax-free pass-through of income under the Internal Revenue Code of 1986, as
amended and to maintain exemption from the registration requirements of the 1940
Act. By investing in REITs indirectly through a Fund, a shareholder will bear
not only his or her proportionate share of the expenses of a Fund's, but also,
indirectly, similar expenses of the REITs. In addition, REITs depend generally
on their ability to generate cash flow to make distributions to shareholders.
Illiquid Securities. Each Fund may purchase securities other than in the open
market. While such purchases may often offer attractive opportunities for
investment not otherwise available on the open market, the securities so
purchased are often "restricted securities" or "not readily marketable," i.e.,
securities which cannot be sold to the public without registration under the
Securities Act of 1933, as amended (the "1933 Act"), or the availability of an
exemption from registration (such as Rule 144A) or because they are subject to
other legal or contractual delays in or restrictions on resale. This investment
practice, therefore, could have the effect of increasing the level of
illiquidity of a Fund. It is each Fund's policy that illiquid securities
(including repurchase agreements of more than seven days duration, certain
restricted securities, and other securities which are not readily marketable)
may not constitute, at the time of purchase, more than 15% of the value of the
Fund's net assets. A security is deemed illiquid if so determined pursuant to
procedures adopted by the Board of Trustees.
Generally speaking, restricted securities may be sold (i) only to qualified
institutional buyers; (ii) in a privately negotiated transaction to a limited
number of purchasers; (iii) in limited quantities after they have been held for
a specified period of time and other conditions are met pursuant to an exemption
from registration; or (iv) in a public offering for which a registration
statement is in effect under the 1933 Act. Issuers of restricted securities may
not be subject to the disclosure and other investor protection requirements that
would be applicable if their securities were publicly traded. If adverse market
conditions were to develop during the period between a Fund's decision to sell a
restricted or illiquid security and the point at which the Fund is permitted or
able to sell such security, the Fund might obtain a price less favorable than
the price that prevailed when it decided to sell. Where a registration statement
is required for the resale of restricted securities, a Fund may be required to
bear all or part of the registration expenses. A Fund may be deemed to be an
"underwriter" for purposes of the 1933 Act when
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selling restricted securities to the public and, in such event, the Fund may be
liable to purchasers of such securities if the registration statement prepared
by the issuer is materially inaccurate or misleading.
Since it is not possible to predict with assurance that the market for
securities eligible for resale under Rule 144A will continue to be liquid, the
Adviser will monitor such restricted securities subject to the supervision of
the Board of Trustees. Among the factors the Adviser may consider in reaching
liquidity decisions relating to Rule 144A securities are: (1) the frequency of
trades and quotes for the security; (2) the number of dealers wishing to
purchase or sell the security and the number of other potential purchasers; (3)
dealer undertakings to make a market in the security; and (4) the nature of the
security and the nature of the market for the security (i.e., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
the transfer).
Strategic Transactions and Derivatives. Each of the Funds may, but is not
required to, utilize various other investment strategies as described below to
invest cash on a temporary basis in equity derivatives, manage liquidity, hedge
various market risks (such as interest rates, currency exchange rates, and broad
or specific equity or fixed-income market movements), manage the effective
maturity or duration of fixed-income securities in a Fund's portfolio, or
enhance potential gain. These strategies may be executed through the use of
derivative contracts. Such strategies are generally accepted as part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. Techniques and instruments may change over time as new
instruments and strategies are developed or regulatory changes occur.
In the course of pursuing these investment strategies, a Fund may purchase and
sell exchange-listed and over-the-counter put and call options on securities,
equity and fixed-income indices and other financial instruments, purchase and
sell financial futures contracts and options thereon, enter into various
interest rate transactions such as swaps, caps, floors or collars, and enter
into various currency transactions such as currency forward contracts, currency
futures contracts, currency swaps or options on currencies or currency futures.
(Collectively, all the above are called "Strategic Transactions.") Strategic
Transactions may be used to attempt to protect against possible changes in the
market value of securities held in or to be purchased for the Fund's portfolio
resulting from securities markets or currency exchange rate fluctuations, to
protect the Fund's unrealized gains in the value of its portfolio securities, to
facilitate the sale of such securities for investment purposes, to manage the
effective maturity or duration of fixed-income securities in a Fund's portfolio,
or to establish a position in the derivatives markets as a temporary substitute
for purchasing or selling particular securities. Some Strategic Transactions may
also be used to enhance potential gain although no more than 5% of a Fund's
assets will be committed to Strategic Transactions entered into for this
purpose. Any or all of these investment techniques may be used at any time and
there is no particular strategy that dictates the use of one technique rather
than another, as use of any Strategic Transaction is a function of numerous
variables including market conditions. The ability of a Fund to utilize these
Strategic Transactions successfully will depend on the Adviser's ability to
predict pertinent market movements, which cannot be assured. The Funds will
comply with applicable regulatory requirements when implementing these
strategies, techniques and instruments. Strategic Transactions involving
financial futures and options thereon will be purchased, sold or entered into
only for bona fide hedging, risk management or portfolio management purposes and
not to create leveraged exposure in a Fund.
Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
the Adviser's view as to certain market movements is incorrect, the risk that
the use of such Strategic Transactions could result in losses greater than if
they had not been used. Use of put and call options may result in losses to a
Fund, force the sale or purchase of portfolio securities at inopportune times or
for prices higher than (in the case of put options) or lower than (in the case
of call options) current market values, limit the amount of appreciation a Fund
can realize on its investments or cause a Fund to hold a security it might
otherwise sell. The use of currency transactions can result in a Fund incurring
losses as a result of a number of factors including the imposition of exchange
controls, suspension of settlements, or the inability to deliver or receive a
specified currency. The use of options and futures transactions entails certain
other risks. In particular, the variable degree of correlation between price
movements of futures contracts and price movements in the related portfolio
position of a Fund creates the possibility that losses on the hedging instrument
may be greater than gains in the value of a Fund's position. In addition,
futures and options markets may not be liquid in all circumstances and certain
over-the-counter options may have no markets. As a result, in certain markets, a
Fund might not be able to close out a transaction without incurring substantial
losses, if at all. Although the use of futures and options transactions for
hedging should tend to minimize the risk of loss due to a decline in the value
of the hedged position, at the same time they tend to limit any potential gain
which might result from an increase in value of such position. Finally, the
daily variation margin requirements for futures contracts would create a greater
ongoing potential financial risk than would purchases of options, where the
exposure is limited to the cost of the initial premium. Losses resulting from
the use of
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Strategic Transactions would reduce net asset value, and possibly income, and
such losses can be greater than if the Strategic Transactions had not been
utilized.
General Characteristics of Options. Put options and call options typically have
similar structural characteristics and operational mechanics regardless of the
underlying instrument on which they are purchased or sold. Thus, the following
general discussion relates to each of the particular types of options discussed
in greater detail below. In addition, many Strategic Transactions involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."
A put option gives the purchaser of the option, upon payment of a premium, the
right to sell, and the writer the obligation to buy, the underlying security,
commodity, index, currency or other instrument at the exercise price. For
instance, a Fund's purchase of a put option on a security might be designed to
protect its holdings in the underlying instrument (or, in some cases, a similar
instrument) against a substantial decline in the market value by giving a Fund
the right to sell such instrument at the option exercise price. A call option,
upon payment of a premium, gives the purchaser of the option the right to buy,
and the seller the obligation to sell, the underlying instrument at the exercise
price. A Fund's purchase of a call option on a security, financial future,
index, currency or other instrument might be intended to protect a Fund against
an increase in the price of the underlying instrument that it intends to
purchase in the future by fixing the price at which it may purchase such
instrument. An American style put or call option may be exercised at any time
during the option period while a European style put or call option may be
exercised only upon expiration or during a fixed period prior thereto. A Fund is
authorized to purchase and sell exchange listed options and over-the-counter
options ("OTC options"). Exchange listed options are issued by a regulated
intermediary such as the Options Clearing Corporation ("OCC"), which guarantees
the performance of the obligations of the parties to such options. The
discussion below uses the OCC as an example, but is also applicable to other
financial intermediaries.
With certain exceptions, OCC issued and exchange listed options generally settle
by physical delivery of the underlying security or currency, although in the
future cash settlement may become available. Index options and Eurodollar
instruments are cash settled for the net amount, if any, by which the option is
"in-the-money" (i.e., where the value of the underlying instrument exceeds, in
the case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.
A Fund's ability to close out its position as a purchaser or seller of an OCC or
exchange listed put or call option is dependent, in part, upon the liquidity of
the option market. Among the possible reasons for the absence of a liquid option
market on an exchange are: (i) insufficient trading interest in certain options;
(ii) restrictions on transactions imposed by an exchange; (iii) trading halts,
suspensions or other restrictions imposed with respect to particular classes or
series of options or underlying securities including reaching daily price
limits; (iv) interruption of the normal operations of the OCC or an exchange;
(v) inadequacy of the facilities of an exchange or OCC to handle current trading
volume; or (vi) a decision by one or more exchanges to discontinue the trading
of options (or a particular class or series of options), in which event the
relevant market for that option on that exchange would cease to exist, although
outstanding options on that exchange would generally continue to be exercisable
in accordance with their terms.
The hours of trading for listed options may not coincide with the hours during
which the underlying financial instruments are traded. To the extent that the
option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that cannot be reflected in the option markets.
OTC options are purchased from or sold to securities dealers, financial
institutions or other parties ("Counterparties") through direct bilateral
agreement with the Counterparty. In contrast to exchange listed options, which
generally have standardized terms and performance mechanics, all the terms of an
OTC option, including such terms as method of settlement, term, exercise price,
premium, guarantees and security, are set by negotiation of the parties. A Fund
will only sell OTC options (other than OTC currency options) that are subject to
a buy-back provision permitting a Fund to require the Counterparty to sell the
option back to a Fund at a formula price within seven days. A Fund expects
generally to enter into OTC options that have cash settlement provisions,
although not required to do so.
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Unless the parties provide for it, there is no central clearing or guaranty
function in an OTC option. As a result, if the Counterparty fails to make or
take delivery of the security, currency or other instrument underlying an OTC
option it has entered into with a Fund or fails to make a cash settlement
payment due in accordance with the terms of that option, a Fund will lose any
premium it paid for the option as well as any anticipated benefit of the
transaction. Accordingly, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be
satisfied. A Fund will engage in OTC option transactions only with U.S.
Government securities dealers recognized by the Federal Reserve Bank of New York
as "primary dealers" or broker/dealers, domestic or foreign banks or other
financial institutions which have received (or the guarantors of the obligation
of which have received) a short-term credit rating of A-1 from S&P or P-1 from
Moody's or an equivalent rating from any nationally recognized statistical
rating organization ("NRSRO") or, in the case of OTC currency transactions, are
determined to be of equivalent credit quality by the Adviser. The staff of the
SEC currently takes the position that OTC options purchased by a Fund, and
portfolio securities "covering" the amount of a Fund's obligation pursuant to an
OTC option sold by it (the cost of the sell-back plus the in-the-money amount,
if any) are illiquid, and are subject to a Fund's limitation on investing no
more than 10% of its assets in illiquid securities.
If a Fund sells a call option, the premium that it receives may serve as a
partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments in its portfolio or will
increase a Fund's income. The sale of put options can also provide income.
A Fund may purchase and sell call options on securities including U.S. Treasury
and agency securities, mortgage-backed securities, corporate debt securities,
equity securities (including convertible securities) and Eurodollar instruments
that are traded on U.S. and foreign securities exchanges and in the
over-the-counter markets, and on securities indices, currencies and futures
contracts. All calls sold by a Fund must be "covered" (i.e., a Fund must own the
securities or futures contract subject to the call) or must meet the asset
segregation requirements described below as long as the call is outstanding.
Even though a Fund will receive the option premium to help protect it against
loss, a call sold by a Fund exposes a Fund during the term of the option to
possible loss of opportunity to realize appreciation in the market price of the
underlying security or instrument and may require a Fund to hold a security or
instrument which it might otherwise have sold.
A Fund may purchase and sell put options on securities including U.S. Treasury
and agency securities, mortgage-backed securities, foreign sovereign debt,
corporate debt securities, equity securities (including convertible securities)
and Eurodollar instruments (whether or not it holds the above securities in its
portfolio), and on securities indices, currencies and futures contracts other
than futures on individual corporate debt and individual equity securities. A
Fund will not sell put options if, as a result, more than 50% of a Fund's assets
would be required to be segregated to cover its potential obligations under such
put options other than those with respect to futures and options thereon. In
selling put options, there is a risk that a Fund may be required to buy the
underlying security at a disadvantageous price above the market price.
General Characteristics of Futures. Each of the Funds may enter into financial
futures contracts or purchase or sell put and call options on such futures as a
hedge against anticipated interest rate, currency or equity market changes, for
duration management and for risk management purposes. Futures are generally
bought and sold on the commodities exchanges where they are listed with payment
of initial and variation margin as described below. The sale of a futures
contract creates a firm obligation by a Fund, as seller, to deliver to the buyer
the specific type of financial instrument called for in the contract at a
specific future time for a specified price (or, with respect to index futures
and Eurodollar instruments, the net cash amount). Options on futures contracts
are similar to options on securities except that an option on a futures contract
gives the purchaser the right in return for the premium paid to assume a
position in a futures contract and obligates the seller to deliver such
position.
A Fund's use of financial futures and options thereon will in all cases be
consistent with applicable regulatory requirements and in particular the rules
and regulations of the Commodity Futures Trading Commission and will be entered
into only for bona fide hedging, risk management (including duration management)
or other portfolio management purposes. Typically, maintaining a futures
contract or selling an option thereon requires a Fund to deposit with a
financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on financial futures involves payment of a
premium for the option without any further obligation on the part of a Fund.
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If a Fund exercises an option on a futures contract it will be obligated to post
initial margin (and potential subsequent variation margin) for the resulting
futures position just as it would for any position. Futures contracts and
options thereon are generally settled by entering into an offsetting transaction
but there can be no assurance that the position can be offset prior to
settlement at an advantageous price, nor that delivery will occur.
A Fund will not enter into a futures contract or related option (except for
closing transactions) if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open futures contracts and options thereon would
exceed 5% of a Fund's total assets (taken at current value); however, in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The
segregation requirements with respect to futures contracts and options thereon
are described below.
Options on Securities Indices and Other Financial Indices. Each of the Funds
also may purchase and sell call and put options on securities indices and other
financial indices and in so doing can achieve many of the same objectives it
would achieve through the sale or purchase of options on individual securities
or other instruments. Options on securities indices and other financial indices
are similar to options on a security or other instrument except that, rather
than settling by physical delivery of the underlying instrument, they settle by
cash settlement, i.e., an option on an index gives the holder the right to
receive, upon exercise of the option, an amount of cash if the closing level of
the index upon which the option is based exceeds, in the case of a call, or is
less than, in the case of a put, the exercise price of the option (except if, in
the case of an OTC option, physical delivery is specified). This amount of cash
is equal to the excess of the closing price of the index over the exercise price
of the option, which also may be multiplied by a formula value. The seller of
the option is obligated, in return for the premium received, to make delivery of
this amount. The gain or loss on an option on an index depends on price
movements in the instruments making up the market, market segment, industry or
other composite on which the underlying index is based, rather than price
movements in individual securities, as is the case with respect to options on
securities.
Currency Transactions. Each of the Funds may engage in currency transactions
with Counterparties in order to hedge the value of portfolio holdings
denominated in particular currencies against fluctuations in relative value.
Currency transactions include forward currency contracts, exchange listed
currency futures, exchange listed and OTC options on currencies, and currency
swaps. A forward currency contract involves a privately negotiated obligation to
purchase or sell (with delivery generally required) a specific currency at a
future date, which may be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the contract. A
currency swap is an agreement to exchange cash flows based on the notional
difference among two or more currencies and operates similarly to an interest
rate swap, which is described below. A Fund may enter into currency transactions
with Counterparties which have received (or the guarantors of the obligations of
which have received) a credit rating of A-1 or P-1 by S&P or Moody's,
respectively, or that have an equivalent rating from a NRSRO or are determined
to be of equivalent credit quality by the Adviser.
A Fund's dealings in forward currency contracts and other currency transactions
such as futures, options, options on futures and swaps will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is entering into a currency transaction with respect to
specific assets or liabilities of a Fund, which will generally arise in
connection with the purchase or sale of its portfolio securities or the receipt
of income therefrom. Position hedging is entering into a currency transaction
with respect to portfolio security positions denominated or generally quoted in
that currency.
A Fund will not enter into a transaction to hedge currency exposure to an extent
greater, after netting all transactions intended wholly or partially to offset
other transactions, than the aggregate market value (at the time of entering
into the transaction) of the securities held in its portfolio that are
denominated or generally quoted in or currently convertible into such currency,
other than with respect to proxy hedging or cross hedging as described below.
A Fund may also cross-hedge currencies by entering into transactions to purchase
or sell one or more currencies that are expected to decline in value relative to
other currencies to which a Fund has or in which a Fund expects to have
portfolio exposure.
To reduce the effect of currency fluctuations on the value of existing or
anticipated holdings of portfolio securities, a Fund may also engage in proxy
hedging. Proxy hedging is often used when the currency to which a Fund's
portfolio is exposed is difficult to hedge or to hedge against the dollar. Proxy
hedging entails entering into a forward contract to sell a currency whose
changes in value are generally considered to be linked to a currency or
currencies in which some or all of a Fund's
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portfolio securities are or are expected to be denominated, and to buy U.S.
dollars. The amount of the contract would not exceed the value of a Fund's
securities denominated in linked currencies. For example, if the Adviser
considers that the Austrian schilling is linked to the German deutschemark (the
"D-mark"), a Fund holds securities denominated in schillings and the Adviser
believes that the value of schillings will decline against the U.S. dollar, the
Adviser may enter into a contract to sell D-marks and buy dollars. Currency
hedging involves some of the same risks and considerations as other transactions
with similar instruments. Currency transactions can result in losses to a Fund
if the currency being hedged fluctuates in value to a degree or in a direction
that is not anticipated. Further, there is the risk that the perceived linkage
between various currencies may not be present or may not be present during the
particular time that a Fund is engaging in proxy hedging. If a Fund enters into
a currency hedging transaction, a Fund will comply with the asset segregation
requirements described below.
Risks of Currency Transactions. Currency transactions are subject to risks
different from those of other portfolio transactions. Because currency control
is of great importance to the issuing governments and influences economic
planning and policy, purchases and sales of currency and related instruments can
be negatively affected by government exchange controls, blockages, and
manipulations or exchange restrictions imposed by governments. These can result
in losses to a Fund if it is unable to deliver or receive currency or funds in
settlement of obligations and could also cause hedges it has entered into to be
rendered useless, resulting in full currency exposure as well as incurring
transaction costs. Buyers and sellers of currency futures are subject to the
same risks that apply to the use of futures generally. Further, settlement of a
currency futures contract for the purchase of most currencies must occur at a
bank based in the issuing nation. Trading options on currency futures is
relatively new, and the ability to establish and close out positions on such
options is subject to the maintenance of a liquid market which may not always be
available. Currency exchange rates may fluctuate based on factors extrinsic to
that country's economy.
Combined Transactions. Each of the Funds may enter into multiple transactions,
including multiple options transactions, multiple futures transactions, multiple
currency transactions (including forward currency contracts) and multiple
interest rate transactions and any combination of futures, options, currency and
interest rate transactions ("component" transactions), instead of a single
Strategic Transaction, as part of a single or combined strategy when, in the
opinion of the Adviser, it is in the best interests of a Fund to do so. A
combined transaction will usually contain elements of risk that are present in
each of its component transactions. Although combined transactions are normally
entered into based on the Adviser's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase such
risks or hinder achievement of the portfolio management objective.
Swaps, Caps, Floors and Collars. Among the Strategic Transactions into which the
Funds may enter are interest rate, currency and index swaps and the purchase or
sale of related caps, floors and collars. The Funds expect to enter into these
transactions primarily to preserve a return or spread on a particular investment
or portion of its portfolio, to protect against currency fluctuations, as a
duration management technique or to protect against any increase in the price of
securities a Fund anticipates purchasing at a later date. The Funds intend to
use these transactions as hedges and not as speculative investments and will not
sell interest rate caps or floors where it does not own securities or other
instruments providing the income stream a Fund may be obligated to pay. Interest
rate swaps involve the exchange by a Fund with another party of their respective
commitments to pay or receive interest, e.g., an exchange of floating rate
payments for fixed rate payments with respect to a notional amount of principal.
A currency swap is an agreement to exchange cash flows on a notional amount of
two or more currencies based on the relative value differential among them and
an index swap is an agreement to swap cash flows on a notional amount based on
changes in the values of the reference indices. The purchase of a cap entitles
the purchaser to receive payments on a notional principal amount from the party
selling such cap to the extent that a specified index exceeds a predetermined
interest rate or amount. The purchase of a floor entitles the purchaser to
receive payments on a notional principal amount from the party selling such
floor to the extent that a specified index falls below a predetermined interest
rate or amount. A collar is a combination of a cap and a floor that preserves a
certain return within a predetermined range of interest rates or values.
A Fund will usually enter into swaps on a net basis, i.e., the two payment
streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with a Fund receiving or paying, as the case may
be, only the net amount of the two payments. Inasmuch as these swaps, caps,
floors and collars are entered into for good faith hedging purposes, the Adviser
and a Fund believe such obligations do not constitute senior securities under
the 1940 Act and, accordingly, will not treat them as being subject to its
borrowing restrictions. A Fund will not enter into any swap, cap, floor or
collar transaction unless, at the time of entering into such transaction, the
unsecured long-term debt of the Counterparty, combined with any
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credit enhancements, is rated at least A by S&P or Moody's or has an equivalent
rating from a NRSRO or is determined to be of equivalent credit quality by the
Adviser. If there is a default by the Counterparty, a Fund may have contractual
remedies pursuant to the agreements related to the transaction. The swap market
has grown substantially in recent years with a large number of banks and
investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and,
accordingly, they are less liquid than swaps.
Eurodollar Instruments. Each of the Funds may make investments in Eurodollar
instruments. Eurodollar instruments are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London Interbank Offered
Rate ("LIBOR"), although foreign currency-denominated instruments are available
from time to time. Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of funds and sellers to obtain a fixed rate for
borrowings. A Fund might use Eurodollar futures contracts and options thereon to
hedge against changes in LIBOR, to which many interest rate swaps and fixed
income instruments are linked.
Risks of Strategic Transactions Outside the U.S. When conducted outside the
U.S., Strategic Transactions may not be regulated as rigorously as in the U.S.,
may not involve a clearing mechanism and related guarantees, and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities, currencies and other instruments. The value of such positions also
could be adversely affected by: (i) other complex foreign political, legal and
economic factors, (ii) lesser availability than in the U.S. of data on which to
make trading decisions, (iii) delays in a Fund's ability to act upon economic
events occurring in foreign markets during non-business hours in the U.S., (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the U.S., and (v) lower trading volume and
liquidity.
Use of Segregated and Other Special Accounts. Many Strategic Transactions, in
addition to other requirements, require that a Fund segregate liquid assets with
its custodian to the extent a Fund's obligations are not otherwise "covered"
through ownership of the underlying security, financial instrument or currency.
In general, either the full amount of any obligation by a Fund to pay or deliver
securities or assets must be covered at all times by the securities, instruments
or currency required to be delivered, or, subject to any regulatory
restrictions, an amount of cash or liquid securities at least equal to the
current amount of the obligation must be segregated with the custodian. The
segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. For
example, a call option written by a Fund will require a Fund to hold the
securities subject to the call (or securities convertible into the needed
securities without additional consideration) or to segregate liquid securities
sufficient to purchase and deliver the securities if the call is exercised. A
call option sold by a Fund on an index will require a Fund to own portfolio
securities which correlate with the index or to segregate liquid assets equal to
the excess of the index value over the exercise price on a current basis. A put
option written by a Fund requires a Fund to segregate liquid assets equal to the
exercise price.
Except when a Fund enters into a forward contract for the purchase or sale of a
security denominated in a particular currency, which requires no segregation, a
currency contract which obligates a Fund to buy or sell currency will generally
require a Fund to hold an amount of that currency or liquid securities
denominated in that currency equal to a Fund's obligations or to segregate
liquid assets equal to the amount of a Fund's obligation.
OTC options entered into by a Fund, including those on securities, currency,
financial instruments or indices and OCC issued and exchange listed index
options, will generally provide for cash settlement. As a result, when a Fund
sells these instruments it will only segregate an amount of assets equal to its
accrued net obligations, as there is no requirement for payment or delivery of
amounts in excess of the net amount. These amounts will equal 100% of the
exercise price in the case of a non cash-settled put, the same as an OCC
guaranteed listed option sold by a Fund, or the in-the-money amount plus any
sell-back formula amount in the case of a cash-settled put or call. In addition,
when a Fund sells a call option on an index at a time when the in-the-money
amount exceeds the exercise price, a Fund will segregate, until the option
expires or is closed out, cash or cash equivalents equal in value to such
excess. OCC issued and exchange listed options sold by a Fund other than those
above generally settle with physical delivery, or with an election of either
physical delivery or cash settlement and a Fund will segregate an amount of
assets equal to the full value of the option. OTC options settling with physical
delivery, or with an election of either physical delivery or cash settlement
will be treated the same as other options settling with physical delivery.
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<PAGE>
In the case of a futures contract or an option thereon, a Fund must deposit
initial margin and possible daily variation margin in addition to segregating
assets sufficient to meet its obligation to purchase or provide securities or
currencies, or to pay the amount owed at the expiration of an index-based
futures contract. Such assets may consist of cash, cash equivalents, liquid debt
or equity securities or other acceptable assets.
With respect to swaps, a Fund will accrue the net amount of the excess, if any,
of its obligations over its entitlements with respect to each swap on a daily
basis and will segregate an amount of cash or liquid securities having a value
equal to the accrued excess. Caps, floors and collars require segregation of
assets with a value equal to a Fund's net obligation, if any.
Strategic Transactions may be covered by other means when consistent with
applicable regulatory policies. A Fund may also enter into offsetting
transactions so that its combined position, coupled with any segregated assets,
equals its net outstanding obligation in related options and Strategic
Transactions. For example, a Fund could purchase a put option if the strike
price of that option is the same or higher than the strike price of a put option
sold by a Fund. Moreover, instead of segregating assets if a Fund held a futures
or forward contract, it could purchase a put option on the same futures or
forward contract with a strike price as high or higher than the price of the
contract held. Other Strategic Transactions may also be offset in combinations.
If the offsetting transaction terminates at the time of or after the primary
transaction no segregation is required, but if it terminates prior to such time,
assets equal to any remaining obligation would need to be segregated.
Small Company Risk. Each fund may purchase the securities of small companies.
The Adviser believes that small companies often have sales and earnings growth
rates which exceed those of larger companies, and that such growth rates may in
turn be reflected in more rapid share price appreciation over time. However,
investing in smaller company stocks involves greater risk than is customarily
associated with investing in larger, more established companies. For example,
smaller companies can have limited product lines, markets, or financial and
managerial resources. Smaller companies may also be dependent on one or a few
key persons, and may be more susceptible to losses and risks of bankruptcy.
Also, the securities of the smaller companies in which certain Funds may invest,
may be thinly traded (and therefore have to be sold at a discount from current
market prices or sold in small lots over an extended period of time).
Transaction costs in smaller company stocks may be higher than those of larger
companies.
Temporary Defensive Positions. From time to time, a fund may invest a portion of
its assets in cash and cash equivalents for temporary defensive or emergency
purposes. Defensive investments should serve to lessen volatility in an adverse
stock market, although they also generate lower returns than stocks in most
markets. Because this defensive policy differs from the fund's investment
objective, a fund may not achieve its goals during a defensive period.
Master/Feeder Structure. The Board of Trustees may determine, without further
shareholder approval, in the future that the objective of a Fund would be
achieved more effectively by investing in a master fund in a master/feeder
structure. A master/feeder structure is one in which a fund (a "feeder fund"),
instead of investing directly in a portfolio of securities, invests 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 in the master fund in an effort to achieve possible economies of
scale and efficiencies in portfolio management, while preserving separate
identities, management or distribution channels at the feeder fund level. 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 the
realization of taxable gain or loss, or by contributing its assets to the master
fund and avoiding transaction costs and the realization of taxable gain or loss.
PORTFOLIO TRANSACTIONS
Scudder Kemper Investments, Inc. (the "Adviser") and its affiliates furnish
investment management services for the Kemper Funds, Zurich Money Market Funds
and other clients including affiliated insurance companies. The Adviser and its
affiliates share some common research and trading facilities. At times,
investment decisions may be made to purchase or sell the same investment
securities for a Fund and for one or more of the other clients managed by the
Adviser or its affiliates. When two or more of such clients are simultaneously
engaged in the purchase or sale of the same security through the same trading
facility, the transactions are allocated as to amount and price in a manner
considered equitable to each.
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<PAGE>
National securities exchanges have established limitations governing the maximum
number of options in each class which may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options a Fund
will be able to write on a particular security.
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities, options or futures contracts available to a Fund. On the
other hand, the ability of a Fund to participate in volume transactions may
produce better executions for that Fund in some cases.
BROKERAGE COMMISSIONS
Allocation of brokerage is supervised by the Advisor.
The primary objective of the Advisor in placing orders for the purchase and sale
of securities for a Fund 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
Advisor seeks to evaluate the overall reasonableness of brokerage commissions
paid (to the extent applicable) through the familiarity of the Distributor with
commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Advisor
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
The Funds' purchases and sales of fixed income securities are generally placed
by the Advisor with primary market makers for these securities on a net basis,
without any brokerage commission being paid by a Fund. Trading does, however,
involve transaction costs. Transactions with dealers serving as primary market
makers reflect the spread between the bid and asked prices. Purchases of
underwritten issues may be made, which will include an underwriting fee paid to
the underwriter.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Advisor's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research and market statistical information" includes advice as
to the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchases or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Advisor 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 on account of execution services and the receipt
of research, market or statistical information. The Advisor may place orders
with broker/dealers on the basis that the broker/dealer has or has not sold
shares of a Fund. 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.
To the maximum extent feasible, it is expected that the Advisor will place
orders for portfolio transactions through the Distributor, which is a
corporation registered as a broker/dealer and a subsidiary of the Advisor, the
Distributor will place orders on behalf of the Funds with issuers, underwriters
or other brokers and dealers. The Distributor will not receive any commission,
fee or other remuneration from the Funds for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Advisor, it is the opinion of
the Advisor that such information only supplements the Advisor's own research
effort since the information must still be analyzed, weighed, and reviewed by
the Advisor's staff. Such information may be useful to the Advisor in providing
services to clients other than a Fund, and not all such information is used by
the Advisor in connection with a Fund. Conversely, such information provided to
the Advisor by broker/dealers through whom other clients of the Advisor effect
securities transactions may be useful to the Advisor 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.
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INVESTMENT MANAGER AND UNDERWRITER
INVESTMENT MANAGER. Scudder Kemper Investments, Inc. ("Scudder Kemper"), 345
Park Avenue, New York, New York, is each Fund's investment manager. Scudder
Kemper is approximately 70% owned by Zurich Financial Services, Inc. a newly
formed global insurance and financial services company. The balance of the
Adviser is owned by its officers and employees. Pursuant to investment
management agreements, Scudder Kemper 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 a Fund if elected to such positions. Each investment
management agreement provides that each Fund pays the charges and expenses of
its operations, including the fees and expenses of the trustees (except those
who are affiliated with officers or employees of Scudder Kemper), independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, brokerage commissions or
transaction costs, costs of calculating net asset value and maintaining all
accounting records related thereto, taxes and membership dues. Each Fund bears
the expenses of registration of its shares with the Securities and Exchange
Commission, while Kemper Distributors, Inc. ("KDI"), as principal underwriter,
pays the cost of qualifying and maintaining the qualification of each Fund's
shares for sale under the securities laws of the various states.
The investment management agreements provide that Scudder Kemper shall not be
liable for any error of judgment or of law, or for any loss suffered by a Fund
in connection with the matters to which the agreements relate, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
Scudder Kemper in the performance of its obligations and duties, or by reason of
its reckless disregard of its obligations and duties under each agreement.
Each Fund's investment management agreement continues in effect from year to
year so long as its continuation is approved at least annually (a) by a majority
of the trustees who are not parties to such agreement or interested persons of
any such party except in their capacity as trustees of the Fund and (b) by the
shareholders or the Board of Trustees of the Fund. Each Fund's investment
management agreement may be terminated at any time upon 60 days notice by either
party, or by a majority vote of the outstanding shares of the Fund, and will
terminate automatically upon assignment. If additional Funds become subject to
an investment management agreement, the provisions concerning continuation,
amendment and termination shall be on a Fund by Fund basis. Additional Funds may
be subject to a different agreement.
At December 31, 1997, pursuant to the terms of an agreement, Scudder, Stevens &
Clark, Inc. ("Scudder") and Zurich Insurance Company ("Zurich") formed a new
global organization by combining Scudder with Zurich Kemper Investments, Inc., a
former subsidiary of Zurich, and Scudder changed its name to Scudder Kemper
Investments, Inc. As a result of the transaction, Zurich owned approximately 70%
of the Adviser, with the balance owned by the Adviser's officers and employees.
On September 7, 1998, the businesses of Zurich (including Zurich's 70% interest
in Scudder Kemper) and the financial services businesses of B.A.T Industries
p.l.c. ("B.A.T") were combined to form a new global insurance and financial
services company known as Zurich Financial Services, Inc. By way of a dual
holding company structure, former Zurich shareholders initially owned
approximately 57% of Zurich Financial Services, Inc., with the balance initially
owned by former B.A.T shareholders.
Kemper Research Fund and Kemper Large Company Growth Fund each pays the
investment manager an annual fee as a percentage of the fund's average daily net
assets for providing investment management services, as described in the
following table:
Applicable Assets ($) Annual Fee Rate
--------------------- ---------------
0 - 250,000,000 0.70%
250,000,000 - 1,000,000,000 0.67%
1,000,000,000 - 2,500,000,000 0.65%
More than 2,500,000,000 0.63%
Kemper Small Cap Value+Growth Fund pays the investment manager an annual fee as
a percentage of the fund's average daily net assets for providing investment
management services, as described in the following table:
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Applicable Assets ($) Annual Fee Rate
--------------------- ---------------
0 - 250,000,000 0.75%
250,000,000 - 1,000,000,000 0.72%
1,000,000,000 - 2,500,000,000 0.70%
More than 2,500,000,000 0.68%
FUND ACCOUNTING AGENT. Scudder Fund Accounting Corporation, a subsidiary of
Scudder Kemper, is responsible for determining the daily net asset value per
share of the Funds and maintaining all accounting records related thereto.
Currently, SFAC receives an annual fee of 2.50 of 1% of average daily net assets
for the first $150 million of fund net assets, 0.75 of 1% of average daily net
assets for the next $850 million of fund net assets, and 0.45 of 1% of average
daily net assets for the excess over $1 billion of fund net assets for its
services to the Funds.
PRINCIPAL UNDERWRITER. Pursuant to separate underwriting and distribution
services agreement ("distribution agreemens"), Kemper Distributors, Inc.
("KDI"), 222 South Riverside Plaza, Chicago, Illinois, a wholly owned subsidiary
of Scudder Kemper, is the principal underwriter and distributor for the shares
of each Fund and acts as agent of each Fund in the continuous offering of its
shares. KDI bears all of its expenses of providing services pursuant to the
distribution agreement, including the payment of any commissions. Each Fund pays
the cost for the prospectus and shareholder reports to be set in type and
printed for existing shareholders, and KDI, as principal underwriter, pays for
the printing and distribution of copies thereof used in connection with the
offering of shares to prospective investors. KDI also pays for supplementary
sales literature and advertising costs.
The distribution agreement continues in effect from year to year so long as such
continuance is approved for each class at least annually by a vote of the Board
of Trustees of the Fund, including the Trustees who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
agreement. The agreement automatically terminates in the event of its assignment
and may be terminated for a class at any time without penalty by a Fund or by
KDI upon 60 days' notice. Termination by a Fund with respect to a class may be
by vote of a majority of the Board of Trustees, or a majority of the Trustees
who are not interested persons of the Fund and who have no direct or indirect
financial interest in the agreement, or a "majority of the outstanding voting
securities" of the class of the Fund, as defined under the Investment Company
Act of 1940 (the "1940 Act"). The agreement may not be amended for a class to
increase the fee to be paid by a Fund with respect to such class without
approval by a majority of the outstanding voting securities of such class of the
Fund and all material amendments must in any event be approved by the Board of
Trustees in the manner described above with respect to the continuation of the
agreement. The provisions concerning the continuation, amendment and termination
of the distribution agreement are on a Fund by Fund basis and for each Fund on a
class by class basis.
RULE 12B-1 PLANS. The Trust has adopted on behalf of the Funds, in accordance
with Rule 12b-1 under the 1940 Act, separate Rule 12b-1 distribution plans
pertaining to each Fund's Class B and Class C shares (each a "Plan"). Under each
Plan, the Fund pays KDI a distribution fee, payable monthly, at the annual rate
of 0.75% of the average daily net assets attributable to its Class B or Class C
shares. Under each Plan, KDI may compensate various financial services firms
("Firms") for sales of Fund shares and may pay other commissions, fees and
concessions to such Firms. The distribution fee compensates KDI for expenses
incurred in connection with activities primarily intended to result in the sale
of a Fund's Class B or Class C shares, including the printing, or prospectuses
and reports for persons other than existing shareholders and the preparation,
printing and distribution of sales literature and advertising materials.
Among other things, each Plan provides that KDI will prepare reports for the
Board on a quarterly basis for each class showing amounts paid to the various
Firms and such other information as the Board may reasonably request. Each Plan
will continue in effect indefinitely, provided that such continuance is approved
at least annually by vote of a majority of the Board of Trustees, and a majority
of the Trustees who are not "interested persons" (as defined in the 1940 Act) of
the Funds and who have no direct or indirect financial interest in the operation
of the Plan ("Qualified Board Members"), cast at an in-person meeting called for
such purpose, or by vote of at least a majority of the outstanding voting
securities of the applicable class. Any material amendment to a Plan must be
approved by vote of a majority of the Board of Trustees, and of the Qualified
Board Members. An amendment to a Plan to increase materially the amount to be
paid to KDI by a Fund for distribution services with respect to the applicable
class must be approved by a majority of the outstanding voting securities of
that class. While each Plan is in effect, the selection and nomination of
Trustees who are not "interested persons" of the Trust
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<PAGE>
shall be committed to the discretion of the Trustees who are not themselves
"interested persons" of the Trust. If a Plan is terminated (or not renewed) with
respect to either class, the Plan with respect to the other class may continue
in effect unless it also has been terminated ( or not renewed).
ADMINISTRATIVE SERVICES. Administrative services are provided to each Fund under
an administrative services agreement ("administrative agreement") with KDI. KDI
bears all its expenses of providing services pursuant to the administrative
agreement between KDI and each Fund, including the payment of service fees. Each
Fund pays KDI an administrative services fee, payable monthly, at an annual rate
of up to 0.25% of average daily net assets of Class A, B and C shares of each
Fund.
KDI has entered into related arrangements with various broker-dealer firms and
other service or administrative firms ("firms"), that provide services and
facilities for their customers or clients who are shareholders of a Fund. The
firms provide such office space and equipment, telephone facilities and
personnel as is necessary or beneficial for providing information and services
to their clients. Such services and assistance may include, but are not limited
to, establishing and maintaining accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Fund,
assistance to clients in changing dividend and investment options, account
designations and addresses and such other services as may be agreed upon from
time to time and permitted by applicable statute, rule or regulation. For Class
A shares, KDI pays each firm a service fee, normally payable quarterly, at an
annual rate of up to 0.25% of the net assets in Fund accounts that it maintains
and services attributable to Class A shares commencing with the month after
investment. With respect to Class B and Class C shares, KDI currently advances
to firms the first-year service fee at a rate of up to 0.25% of the purchase
price of such shares. For periods after the first year, KDI currently intends to
pay firms a service fee at an annual rate of up to 0.25% (calculated monthly and
normally paid quarterly) of the net assets attributable to Class B and Class C
shares maintained and serviced by the firm and the fee continues until
terminated by KDI or the Fund. Firms to which service fees may be paid include
broker-dealers affiliated with KDI.
KDI also may provide some of the above services and may retain any portion of
the fee under the administrative agreement not paid to firms to compensate
itself for administrative functions performed for a Fund. Currently, the
administrative services fee payable to KDI is based only upon Fund assets in
accounts for which there is a firm listed on the Fund's records and it is
intended that KDI will pay all the administrative services fee that it receives
from a Fund to firms in the form of service fees. The effective administrative
services fee rate to be charged against all assets of a Fund while this
procedure is in effect will depend upon the proportion of Fund assets that is in
accounts for which there is a firm of record. The Board of Trustees of the
Trust, in its discretion, may, with respect to a Fund, approve basing the fee to
KDI on all Fund assets in the future.
Certain trustees or officers of the Trust are also directors or officers of
Scudder Kemper or KDI, as indicated under "Officers and Trustees."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. State Street Bank and
Trust Company, 225 Franklin Street, Boston, MA, as custodian, has custody of all
securities and cash of each Fund maintained in the United States. It attends to
the collection of principal and income, and payment for and collection of
proceeds of securities bought and sold by each Fund. Kemper Service Company
("KSvC"), 811 Main Street, Kansas City, MO, an affiliate of Scudder Kemper,
serves as transfer agent and dividend-paying agent and "Shareholder Service
Agent" of each Fund. KSvC receives as transfer agent annual account fees of $10
per account ($18 for retirement accounts) plus account set up, transaction,
maintenance charges, and annual fees associated with the contingent deferred
sales charges and an asset-based fee of 0.08% plus out-of-pocket expense
reimbursement. KSvC's fee is reduced by certain earnings credits in favor of
each Fund.
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 statements, review certain
regulatory reports and the Funds' federal income tax returns, 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. Dechert Price & Rhoads, serves as legal counsel to the Funds.
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PURCHASE AND REDEMPTION OF SHARES
As described in the Funds' prospectus, shares of a Fund are sold at their public
offering price, which is the net asset value per share of the Fund next
determined after an order is received in proper form plus, with respect to Class
A shares, an initial sales charge. The minimum initial investment is $1,000 and
the minimum subsequent investment is $100 but such minimum amounts may be
changed at any time. See the prospectus for certain exceptions to these
minimums. An order for the purchase of shares that is accompanied by a check
drawn on a foreign bank (other than a check drawn on a Canadian bank in U.S.
Dollars) will not be considered in proper form and will not be processed unless
and until the 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.
Upon receipt by the Shareholder Service Agent of a request for redemption,
shares of a Fund will be redeemed by the Fund at the applicable net asset value
per share of such Fund as described in the Funds' prospectus.
Scheduled variations in or the elimination of the initial sales charge for
purchases of Class A shares or the contingent deferred sales charge for
redemptions of Class B or Class C shares, by certain classes of persons or
through certain types of transactions as described in the prospectus, are
provided because of anticipated economies in sales and sales related efforts.
A Fund may suspend the right of redemption or delay payment more than seven days
(a) during any period when the New York Stock Exchange (the "Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for the
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
a Fund's shareholders.
The conversion of Class B shares to Class A shares may be subject to the
continuing availability of an opinion of counsel, ruling by the Internal Revenue
Service or other assurance acceptable to each Fund to the effect that (a) the
assessment of the distribution services fee with respect to Class B shares and
not Class A shares does not result in the Fund's dividends constituting
"preferential dividends" under the Internal Revenue Code, and (b) that the
conversion of Class B shares to Class A shares does not constitute a taxable
event under the Internal Revenue Code. The conversion of Class B shares to Class
A shares may be suspended if such assurance is not available. In that event, no
further conversions of Class B shares would occur, and shares might continue to
be subject to the distribution services fee for an indefinite period that may
extend beyond the proposed conversion date as described in the prospectus.
ADDITIONAL TRANSACTION INFORMATION
Initial Sales Charge Alternative--Class A Shares. The public offering price of
Class A shares for purchasers choosing the initial sales charge alternative is
the net asset value plus a sales charge, as set forth below.
Sales Charge
------------
Allowed
to Dealers
As a As a as a
Percentage Percentage Percentage of
of of Net Offering
Amount of Purchase Offering Price Asset Value* Price
------------------ -------------- ------------ -----
Less than $50,000 5.75% 6.10% 5.20%
$50,000 but less than $100,000 4.50 4.71 4.00
$100,000 but less than $250,000 3.50 3.63 3.00
$250,000 but less than $500,000 2.60 2.67 2.25
$500,000 but less than $1 million 2.00 2.04 1.75
$1 million and over 0.00** 0.00** ***
* Rounded to the nearest one-hundredth percent.
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** Redemption of shares may be subject to a contingent deferred sales charge
as discussed below.
*** Commission is payable by KDI as discussed below.
Each Fund receives the entire net asset value of all its Class A shares sold.
KDI, the Funds' principal underwriter, retains the sales charge on sales of
Class A shares from which it allows discounts from the applicable public
offering price to investment dealers, which discounts are uniform for all
dealers in the United States and its territories. The normal discount allowed to
dealers is set forth in the above table. Upon notice to all dealers with whom it
has sales agreements, KDI may reallow up to the full applicable sales charge, as
shown in the above table, during periods and for transactions specified in such
notice and such reallowances may be based upon attainment of minimum sales
levels. During periods when 90% or more of the sales charge is reallowed, such
dealers may be deemed to be underwriters as that term is defined in the
Securities Act of 1933.
KDI may in its discretion compensate investment dealers or other financial
services firms in connection with the sale of Class A shares of a Fund at net
asset value in accordance with the Large Order NAV Purchase Privilege up to the
following amounts: 1.00% of the net asset value of shares sold on amounts up to
$5 million, 0.50% on the next $45 million and 0.25% on amounts over $50 million.
The commission schedule will be reset on a calendar year basis for sales of
shares pursuant to the Large Order NAV Purchase Privilege to employer sponsored
employee benefit plans using the subaccount recordkeeping system made available
through KSvC. For purposes of determining the appropriate commission percentage
to be applied to a particular sale, KDI will consider the cumulative amount
invested by the purchaser in a Fund and other Kemper Mutual Funds listed under
"Special Features--Class A Shares--Combined Purchases," including purchases
pursuant to the "Combined Purchases," "Letter of Intent" and "Cumulative
Discount" features referred to above. The privilege of purchasing Class A shares
of a Fund at net asset value under the Large Order NAV Purchase Privilege is not
available if another net asset value purchase privilege also applies.
Deferred Sales Charge Alternative--Class B Shares. Investors choosing the
deferred sales charge alternative may purchase Class B shares at net asset value
per share without any sales charge at the time of purchase. Since Class B shares
are being sold without an initial sales charge, the full amount of the
investor's purchase payment will be invested in Class B shares for his or her
account. A contingent deferred sales charge may be imposed upon redemption of
Class B shares. See "Redemption or Repurchase of Shares--Contingent Deferred
Sales Charge--Class B Shares."
KDI compensates firms for sales of Class B shares at the time of sale at a
commission rate of up to 3.75% of the amount of Class B shares purchased. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class B shares. See "Investment Manager and Underwriter."
Purchase of Class C Shares. The public offering price of the Class C shares of a
Fund is the next determined net asset value. No initial sales charge is imposed.
Since Class C shares are sold without an initial sales charge, the full amount
of the investor's purchase payment will be invested in Class C shares for his or
her account. A contingent deferred sales charge may be imposed upon the
redemption of Class C shares if they are redeemed within one year of purchase.
See "Redemption or Repurchase of Shares--Contingent Deferred Sales Charge--Class
C Shares." KDI currently advances to firms the first year distribution fee at a
rate of 0.75% of the purchase price of such shares. For periods after the first
year, KDI currently intends to pay firms for sales of Class C shares a
distribution fee, payable quarterly, at an annual rate of 0.75% of net assets
attributable to Class C shares maintained and serviced by the firm. KDI is
compensated by each Fund for services as distributor and principal underwriter
for Class C shares. See "Investment Manager and Underwriter."
General. Banks and other financial services firms may provide administrative
services related to order placement and payment to facilitate transactions in
shares of a Fund for their clients, and KDI may pay them a transaction fee up to
the level of the discount or commission allowable or payable to dealers, as
described above. Banks are currently prohibited under the Glass-Steagall Act
from providing certain underwriting or distribution services. Banks or other
financial services firms may be subject to various state laws regarding the
services described above and may be required to register as dealers pursuant to
state law. If banking firms were prohibited from acting in any capacity or
providing any of the described services, management would consider what action,
if any, would be appropriate. KDI does not believe that termination of a
relationship with a bank would result in any material adverse consequences to a
Fund.
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KDI may, from time to time, pay or allow to firms a 1% commission on the amount
of shares of the Fund sold under the following conditions: (i) the purchased
shares are held in a Kemper IRA account, (ii) the shares are purchased as a
direct "roll over" of a distribution from a qualified retirement plan account
maintained on a participant subaccount record keeping system provided by KSvC,
(iii) the registered representative placing the trade is a member of ProStar, a
group of persons designated by KDI in acknowledgment of their dedication to the
employee benefit plan area; and (iv) the purchase is not otherwise subject to a
commission.
In addition to the discounts or commissions described above, KDI will, from time
to time, pay or allow additional discounts, commissions or promotional
incentives, in the form of cash or other compensation, to firms that sell shares
of the Funds. Non cash compensation includes luxury merchandise and trips to
luxury resorts. In some instances, such discounts, commissions or other
incentives will be offered only to certain firms that sell or are expected to
sell during specified time periods certain minimum amounts of shares of the
Funds, or other funds underwritten by KDI.
Orders for the purchase of shares of a Fund will be confirmed at a price based
on the net asset value of that Fund next determined after receipt by KDI of the
order accompanied by payment. However, orders received by dealers or other
financial services firms prior to the determination of net asset value (see "Net
Asset Value") and received by KDI prior to the close of its business day will be
confirmed at a price based on the net asset value effective on that day ("trade
date"). The Funds reserve the right to determine the net asset value more
frequently than once a day if deemed desirable. Dealers and other financial
services firms are obligated to transmit orders promptly. Collection may take
significantly longer for a check drawn on a foreign bank than for a check drawn
on a domestic bank. Therefore, if an order is accompanied by a check drawn on a
foreign bank, funds must normally be collected before shares will be purchased.
Investment dealers and other firms provide varying arrangements for their
clients to purchase and redeem the Funds' shares. Some may establish higher
minimum investment requirements than set forth above. Firms may arrange with
their clients for other investment or administrative services. Such firms may
independently establish and charge additional amounts to their clients for such
services, which charges would reduce the clients' return. Firms also may hold
the Funds' shares in nominee or street name as agent for and on behalf of their
customers. In such instances, the Funds' transfer agent will have no information
with respect to or control over the accounts of specific shareholders. Such
shareholders may obtain access to their accounts and information about their
accounts only from their firm. Certain of these firms may receive compensation
from the Funds through the Shareholder Service Agent for recordkeeping and other
expenses relating to these nominee accounts. In addition, certain privileges
with respect to the purchase and redemption of shares or the reinvestment of
dividends may not be available through such firms. Some firms may participate in
a program allowing them access to their clients' accounts for servicing
including, without limitation, transfers of registration and dividend payee
changes; and may perform functions such as generation of confirmation statements
and disbursement of cash dividends. Such firms, including affiliates of KDI, may
receive compensation from the Funds through the Shareholder Service Agent for
these services. This Statement of Additional Information should be read in
connection with such firms' material regarding their fees and services.
The Funds reserve the right to withdraw all or any part of the offering made by
this prospectus and to reject purchase orders. Also, from time to time, each
Fund may temporarily suspend the offering of any class of its shares to new
investors. During the period of such suspension, persons who are already
shareholders of such class of such Fund normally are permitted to continue to
purchase additional shares of such class and to have dividends reinvested.
Shareholders should direct their inquiries to Kemper Service Company, 811 Main
Street, Kansas City, Missouri 64105-2005 or to the firm from which they received
the prospectus.
DIVIDENDS AND TAXES
Dividends. Each Fund normally distributes annual dividends of net investment
income as follows. Each Fund distributes any net realized short-term and
long-term capital gains at least annually. The quarterly distribution to
shareholders of the Total Return Fund may include short-term capital gains.
A Fund may at any time vary its foregoing dividend practices and, therefore,
reserves the right from time to time to either distribute or retain for
reinvestment such of its net investment income and its net short-term and
long-term capital gains as the Board of Trustees of the Fund determines
appropriate under the then current circumstances. In particular, and without
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limiting the foregoing, a Fund may make additional distributions of net
investment income or capital gain net income in order to satisfy the minimum
distribution requirements contained in the Internal Revenue Code (the "Code").
Dividends will be reinvested in shares of the Fund paying such dividends unless
shareholders indicate in writing that they wish to receive them in cash or in
shares of other Kemper Funds as described in the prospectus.
The level of income dividends per share (as a percentage of net asset value)
will be lower for Class B and Class C shares than for Class A shares primarily
as a result of the distribution services fee applicable to Class B and Class C
shares. Distributions of capital gains, if any, will be paid in the same amount
for each class.
Taxes. Each Fund has elected to be treated as a regulated investment company
under Subchapter M of the Code or a predecessor statute and has qualified as
such from inception. Each Fund intends to qualify for such treatement. Such
qualification does not involve governmental supervision of management or
investment practices or policies.
A regulated investment company qualifying under Subchapter M of the Code is
required to distribute to its shareholders at least 90% of its investment
company taxable income (including net short-term capital gain in excess of net
long-term capital loss) and generally is not subject to federal income tax to
the extent that it distributes annually its investment company taxable income
and net realized capital gains in the manner required under the Code.
Investment company taxable income generally is made up of dividends, interest,
and net short-term capital gains in excess of net long-term capital losses, less
expenses. Net capital gains (the excess of net long-term capital gain over net
short-term capital loss) are computed by taking into account any capital loss
carryforward of the Fund. Presently, the Fund has no capital loss carryforward.
Each Fund is subject to a 4% nondeductible excise tax on amounts required to be
but not distributed under a prescribed formula. The formula requires payment to
shareholders during a calendar year of distributions at least equal to the sum
of 98% of the Fund's ordinary income for the calendar year, at least 98% of the
excess of its capital gains over capital losses (adjusted for certain ordinary
losses as prescribed in the Code) realized during the one-year period ending
October 31 during such year, and all ordinary income and capital gains for prior
years that were not previously distributed.
Distributions of investment company taxable income are taxable to shareholders
as ordinary income.
Dividends from domestic corporations are expected to comprise a substantial part
of each Fund's gross income. To the extent that such dividends constitute a
portion of a Fund's gross income, a portion of the income distributions of the
Fund may be eligible for the dividends received deduction for corporations.
Shareholders will be informed of the portion of dividends which so qualify. The
dividends-received deduction is reduced to the extent the shares with respect to
which the dividends are received are treated as debt-financed under the federal
income tax law and is eliminated if either those share or the shares of the Fund
are deemed to have been held by the Fund or the shareholder, as the case may be,
for less than 46 days during the 90 day period beginning 45 days before the
shares become ex-dividend.
Properly designated distributions of net capital gains are taxable to
shareholders as long-term capital gain, regardless of the length of time the
shares of the Fund have been held by such shareholders. Such distributions are
not eligible for the dividends received deduction. Any loss realized upon the
redemption of shares held at the time of redemption for six months or less will
be treated as a long-term capital loss to the extent of any amounts treated as
long-term capital gain distributions during such six-month period.
If any net capital gains are retained by a Fund for reinvestment, requiring
federal income taxes to be paid thereon by the Fund, the Fund intends to elect
to treat such capital gains as having been distributed to shareholders. As a
result, each shareholder will report such capital gains as long-term capital
gains, will be able to claim a relative share of the federal income taxes paid
by the Fund on such gains as a credit against personal federal income tax
liabilities, and will be entitled to increase the adjusted tax basis on Fund
shares by the difference between such reported gains and the individual tax
credit. However, retention of such gains by the Fund may cause the Fund to be
liable for an excise tax on all or a portion of those gains.
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Distributions of investment company taxable income and net realized capital
gains will be taxable as described above, whether made in shares or in cash.
Shareholders electing to receive distributions in the form of additional shares
will have a cost basis for federal income tax purposes in each share so received
equal to the net asset value of a share on the reinvestment date.
All distributions of investment company taxable income and net realized capital
gains, whether received in shares or cash, must be reported by each shareholder
on his or her federal income tax return. Dividends declared in October, November
or December with a record date in such a month and paid during the following
January will be treated by shareholders for federal income tax purposes as if
received on December 31 of the calendar year declared. Redemptions of shares,
including exchanges for shares of another Kemper Mutual fund, may result in tax
consequences (gain or loss) to the shareholder and are also subject to these
reporting requirements.
An individual may make a deductible IRA contribution for any taxable year only
if (i) neither the individual nor his or her spouse (unless filing separate
returns) is an active participant in an employer's retirement plan, or (ii) the
individual (and his or her spouse, if applicable) has an adjusted gross income
below a certain level ($40,050 for married individuals filing a joint return,
with a phase-out of the deduction for adjusted gross income between $40,050 and
$50,000; $25,050 for a single individual, with a phase-out for adjusted gross
income between $25,050 and $35,000). However, an individual not permitted to
make a deductible contribution to an IRA for any such taxable year may
nonetheless make nondeductible contributions up to $2,000 to an IRA (up to
$2,250 to IRAs for an individual and his or her nonearning spouse) for that
year. There are special rules for determining how withdrawals are to be taxed if
an IRA contains both deductible and nondeductible amounts. In general, a
proportionate amount of each withdrawal will be deemed to be made from
nondeductible contributions; amounts treated as a return of nondeductible
contributions will not be taxable. Also, contributions may be made to a spousal
IRA even if the spouse has earnings in a given year, if the spouse elects to be
treated as having no earnings (for IRA contribution purposes) for the year.
Distributions by a Fund result in a reduction in the net asset value of that
Fund's shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution would nevertheless be taxable to the
shareholder as ordinary income or capital gain as described above, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution. The price of shares purchased at
that time includes the amount of the forthcoming distribution. Those purchasing
just prior to a distribution will then receive a partial return of capital upon
the distribution, which will nevertheless be taxable to them.
If a Fund invests in stock of certain foreign investment companies, the Fund may
be subject to U.S. federal income taxation on a portion of any "excess
distribution" with respect to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution or gain ratably to each
day of the Fund's holding period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable year of the
excess distribution or disposition, would be taxed to the Fund at the highest
ordinary income rate in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of the tax deferral deemed
to have resulted from the ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of the distribution or
disposition would be included in the Fund's investment company taxable income
and, accordingly, would not be taxable to the Fund to the extent distributed by
the Fund as a dividend to its shareholders.
Each Fund may make an election to mark to market its shares of these foreign
investment companies in lieu of being subject to U.S. federal income taxation.
At the end of each taxable year to which the election applies, the Fund would
report as ordinary income the amount by which the fair market value of the
foreign company's stock exceeds the Fund's adjusted basis in these shares. Any
mark-to-market losses and any loss from an actual disposition of shares would be
deductible as ordinary losses to the extent of any net mark-to-market gains
included in income in prior years. The effect of the election would be to treat
excess distributions and gain on dispositions as ordinary income which is not
subject to a fund level tax when distributed to shareholders as a dividend.
Alternatively, the Fund may elect to include as income and gain its share of the
ordinary earnings and net capital gain of certain foreign investment companies
in lieu of being taxed in the manner described above.
Equity options (including covered call options written on portfolio stock) and
over-the-counter options on debt securities written or purchased by a Fund will
be subject to tax under Section 1234 of the Code. In general, no loss will be
recognized by the Fund upon payment of a premium in connection with the purchase
of a put or call option. The character of any gain or
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loss recognized (i.e. long-term or short-term) will generally depend, in the
case of a lapse or sale of the option, on the Fund's holding period for the
option, and in the case of the exercise of a put option, on the Fund's holding
period for the underlying property. The purchase of a put option may constitute
a short sale for federal income tax purposes, causing an adjustment in the
holding period of the underlying security or a substantially identical security
in the Fund's portfolio.
If a Fund writes a covered call option on portfolio stock, no gain is recognized
upon its receipt of a premium. If the option lapses or is closed out, any gain
or loss is treated as short-term capital gain or loss. If the option is
exercised, the character of the gain or loss depends on the holding period of
the underlying stock.
Positions of a Fund which consist of at least one stock and at least one stock
option or other position with respect to a related security which substantially
diminishes the Fund's risk of loss with respect to such stock could be treated
as a "straddle" which is governed by Section 1092 of the Code, the operation of
which may cause deferral of losses, adjustments in the holding periods of stocks
or securities and conversion of short-term capital losses into long-term capital
losses. An exception to these straddle rules exists for certain "qualified
covered call options" on stock written by a Fund.
Many or all futures and forward contracts entered into by a Fund and many or all
listed nonequity options written or purchased by a Fund (including options on
debt securities, options on futures contracts, options on foreign currencies and
options on securities indices) will be governed by Section 1256 of the Code.
Absent a tax election to the contrary, gain or loss attributable to the lapse,
exercise or closing out of any such position generally will be treated as 60%
long-term and 40% short-term capital gain or loss, and on the last day of the
Funds' fiscal year (as well as on October 31 for purposes of the 4% excise tax),
all outstanding Section 1256 positions will be marked to market (i.e. treated as
if such positions were sold at their closing price on such day), with any
resulting gain or loss recognized as 60% long-term and 40% short-term capital
gain or loss. Under Section 988 of the Code, discussed below, foreign currency
gain or loss from foreign currency-related forward contracts, certain futures
and options, and similar financial instruments entered into or acquired by the
Fund will be treated as ordinary income. Under certain circumstances, entry into
a futures contract to sell a security may constitute a short sale for federal
income tax purposes, causing an adjustment in the holding period of the
underlying security or a substantially identical security in the Fund's
portfolio.
Positions of the Fund which consist of at least one position not governed by
Section 1256 and at least one futures or forward contract or nonequity option or
other position governed by Section 1256 which substantially diminishes the
Fund's risk of loss with respect to such other position may be treated as a
"mixed straddle." Mixed straddles are subject to the straddle rules of Section
1092 of the Code and may result in the deferral of losses if the non-Section
1256 position is in an unrealized gain at the end of a reporting period.
Notwithstanding any of the foregoing, recent tax law changes may require a Fund
to recognize gain (but not loss) from a constructive sale of certain
"appreciated financial positions" if the Fund enters into a short sale,
offsetting notional principal contract, futures or forward contract transaction
with respect to the appreciated position or substantially identical property.
Appreciated financial positions subject to this constructive sale treatment are
interests (including options, futures and forward contracts and short sales) in
stock, partnership interests, certain actively traded trust instruments and
certain debt instruments. Constructive sale treatment of appreciated financial
positions does not apply to certain transactions closed in the 90-day period
ending with the 30th day after the close of the Fund's taxable year, if certain
conditions are met.
Similarly, if a Fund enters into a short sale of property that becomes
substantially worthless, the Fund will be required to recognize gain at that
time as though it had closed the short sale. Future regulations may apply
similar treatment to other strategic transactions with respect to property that
becomes substantially worthless.
A portion of the difference between the issue price of zero coupon securities
and their face value ("original issue discount") is considered to be income to a
Fund each year, even though the Fund will not receive cash interest payments
from these securities. This original issue discount imputed income will comprise
a part of the investment company taxable income of the Fund which must be
distributed to shareholders in order to maintain the qualification of the Fund
as a regulated investment company and to avoid federal income tax at the Fund's
level.
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Upon the sale or other disposition of shares of a Fund, a shareholder may
realize a capital gain or loss which will be long-term or short-term, generally
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before and
ending 30 days after disposition of the shares. In such a case, the basis of the
shares acquired will be adjusted to reflect the disallowed loss. Any loss
realized by a shareholder on a disposition of Fund shares held by the
shareholder for six months or less will be treated as long-term capital loss to
the extent of any distributions of net capital gains received by the shareholder
with respect to such shares.
A shareholder who has redeemed shares of a Fund or other Kemper Mutual Fund
listed in the prospectus under "Special Features--Class A Shares--Combined
Purchases" (other than shares of Kemper Cash Reserves Fund not acquired by
exchange from another Kemper Mutual Fund) may reinvest the amount redeemed at
net asset value at the time of the reinvestment in shares of any Fund or in
shares of a Kemper Mutual Fund within six months of the redemption as described
in the prospectus under "Redemption or Repurchase of Shares--Reinvestment
Privilege." If redeemed shares were purchased after October 3, 1989 and were
held less than 91 days, then the lesser of (a) the sales charge waived on the
reinvested shares, or (b) the sales charge incurred on the redeemed shares, is
included in the basis of the reinvested shares and is not included in the basis
of the redeemed shares. If a shareholder realized a loss on the redemption or
exchange of a Fund's shares and reinvests in shares of the same Fund 30 days
before or after the redemption or exchange, the transactions may be subject to
the wash sale rules resulting in a postponement of the recognition of such loss
for federal income tax purposes. An exchange of a Fund's shares for shares of
another fund is treated as a redemption and reinvestment for federal income tax
purposes upon which gain or loss may be recognized.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund actually collects such
receivables or pays such liabilities generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities denominated in a
foreign currency and on disposition of certain futures contracts, forward
contracts and options, gains or losses attributable to fluctuations in the value
of foreign currency between the date of acquisition of the security or contract
and the date of disposition are also treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of the Fund's investment company taxable
income to be distributed to its shareholders as ordinary income.
Income received by a Fund from sources within a foreign country may be subject
to foreign and other withholding taxes imposed by that country.
Each Fund will be required to report to the IRS all distributions of taxable
income and capital gains as well as gross proceeds from the redemption or
exchange of Fund shares, except in the case of certain exempt shareholders.
Under the backup withholding provisions of Section 3406 of the Code
distributions of taxable income and capital gains and proceeds from the
redemption or exchange of the shares of a regulated investment company may be
subject to withholding of federal income tax at the rate of 31% in the case of
nonexempt shareholders who fail to furnish the investment company with their
taxpayer identification numbers and with required certifications regarding their
status under the federal income tax law. Withholding may also be required if a
Fund is notified by the IRS or a broker that the taxpayer identification number
furnished by the shareholder is incorrect or that the shareholder has previously
failed to report interest or dividend income. If the withholding provisions are
applicable, any such distributions and proceeds, whether taken in cash or
reinvested in shares, will be reduced by the amounts required to be withheld.
Shareholders may be subject to state and local taxes on distributions received
from a Fund and on redemptions of the Fund's shares. Each distribution is
accompanied by a brief explanation of the form and character of the
distribution. By January 31 of each year each Fund issues to each shareholder a
statement of the federal income tax status of all distributions.
The Trust is organized as a Massachusetts business trust. Neither the Trust nor
any Fund is expected to be liable for any income or franchise tax in the
Commonwealth of Massachusetts, provided that each Fund qualifies as a regulated
investment company under the Code.
The foregoing discussion of U.S. federal income tax law relates solely to the
application of that law to U.S. persons, i.e., U.S. citizens and residents and
U.S. corporations, partnerships, trusts and estates. Each shareholder who is not
a U.S. person should consider the U.S. and foreign tax consequences of ownership
of shares of the Fund, including the possibility that such
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a shareholder may be subject to a U.S. withholding tax at a rate of 30% (or at a
lower rate under an applicable income tax treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from U.S. sources under the Code.
Shareholders should consult their tax advisers about the application of the
provisions of tax law described in this statement of additional information in
light of their particular tax situations.
TAX-SHELTERED RETIREMENT PLANS. The Shareholder Service Agent provides
retirement plan services and documents and KDI can establish investor accounts
in traditional, Roth and Education Individual Retirement Accounts ("IRAs"). This
includes Savings Incentive Match Plan for Employees of Small Employers
("SIMPLE"), Simplified Employee Pension Plan ("SEP") IRA accounts and prototype
documents. Brochures describing these accounts and plans, and materials for
establishing them are available from the Shareholder Service Agent upon request.
Investors should consult with their own tax advisors before establishing a
retirement plan.
NET ASSET VALUE
The net asset value per share of a Fund is the value of one share and is
determined separately for each class by dividing the value of a Fund's net
assets attributable to the class by the number of shares of that class
outstanding. The per share net asset value of each of Class B and Class C shares
of the Fund will generally be lower than that of the Class A shares of a Fund
because of the higher expenses borne by the Class B and Class C shares. The net
asset value of shares of a Fund is computed as of the close of regular trading
(the "value time") on the New York Stock Exchange (the "Exchange") on each day
the Exchange is open for trading. The Exchange is scheduled to be closed on the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and
Christmas.
Portfolio securities for which market quotations are readily available are
generally valued at market value as of the value time in the manner described
below. All other securities may be valued at fair value as determined in good
faith by or under the direction of the Board.
With respect to the Funds with securities listed primarily on foreign exchanges,
such securities may trade on days when the Fund's net asset value is not
computed; and therefore, the net asset value of a Fund may be significantly
affected on days when the investor has no access to the Fund.
An exchange-traded equity security is valued at its most recent sale price.
Lacking any sales, the security is valued at the calculated mean between the
most recent bid quotation and the most recent asked quotation (the "Calculated
Mean"). Lacking a Calculated Mean, the security is valued at the most recent bid
quotation. An equity security which is traded on The Nasdaq Stock Market Inc.
("Nasdaq") is valued at its most recent sale price. Lacking any sales, the
security is valued at the most recent bid quotation. The value of an equity
security not quoted on Nasdaq, but traded in another over-the-counter market, is
its most recent sale price. Lacking any sales, the security is valued at the
Calculated Mean. Lacking a Calculated Mean, the security is valued at the most
recent bid quotation.
Debt securities are valued at prices supplied by a pricing agent(s) which
reflect broker/dealer supplied valuations and electronic data processing
techniques. Money market instruments purchased with an original maturity of
sixty days or less, maturing at par, shall be valued at amortized cost, which
the Board believes approximates market value. If it is not possible to value a
particular debt security pursuant to these valuation methods, the value of such
security is the most recent bid quotation supplied by a bona fide marketmaker.
If it is not possible to value a particular debt security pursuant to the above
methods, the investment manager of the particular fund may calculate the price
of that debt security, subject to limitations established by the Board.
An exchange-traded options contract on securities, currencies, futures and other
financial instruments is valued at its most recent sale price on such exchange.
Lacking any sales, the options contract is valued at the Calculated Mean.
Lacking any Calculated Mean, the options contract is valued at the most recent
bid quotation in the case of a purchased
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options contract, or the most recent asked quotation in the case of a written
options contract. An options contract on securities, currencies and other
financial instruments traded over-the-counter is valued at the most recent bid
quotation in the case of a purchased options contract and at the most recent
asked quotation in the case of a written options contract. Futures contracts are
valued at the most recent settlement price. Foreign currency exchange forward
contracts are valued at the value of the underlying currency at the prevailing
exchange rate on the valuation date.
If a security is traded on more than one exchange, or upon one or more exchanges
and in the over-the-counter market, quotations are taken from the market in
which the security is traded most extensively.
If, in the opinion of the Valuation Committee of the Board of Trustees, the
value of a portfolio asset as determined in accordance with these procedures
does not represent the fair market value of the portfolio asset, the value of
the portfolio asset is taken to be an amount which, in the opinion of the
Valuation Committee, represents fair market value on the basis of all available
information. The value of other portfolio holdings owned by a Fund is determined
in a manner which, in the discretion of the Valuation Committee, most fairly
reflects market value of the property on the valuation date.
Following the valuations of securities or other portfolios assets in terms of
the currency in which the market quotation used is expressed ("Local Currency"),
the value of these portfolio assets in terms of U.S. dollars is calculated by
converting the Local Currency into U.S. dollars at the prevailing currency
exchange rate on the valuation date.
PERFORMANCE
The Funds may advertise several types of performance information for a class of
shares, including "average annual total return" and "total return." Performance
information will be computed separately for Class A, Class B and Class C shares
of a Fund. Each of these figures is based upon historical results and is not
representative of the future performance of any class of the Funds.
Average annual total return and total return figures measure both the net
investment income generated by, and the effect of any realized and unrealized
appreciation or depreciation of, the underlying investments in a Fund's
portfolio for the period referenced, assuming the reinvestment of all dividends.
Thus, these figures reflect the change in the value of an investment in a Fund
during a specified period. Average annual total return will be quoted for at
least the one, five and ten year periods ending on a recent calendar quarter (or
if such periods have not yet elapsed, at the end of a shorter period
corresponding to the life of the Fund for performance purposes). Average annual
total return figures represent the average annual percentage change over the
period in question. Total return figures represent the aggregate percentage or
dollar value change over the period in question.
Each Fund's average annual total return quotation is computed in accordance with
a standardized method prescribed by rules of the Securities and Exchange
Commission. The average annual total return for a Fund for a specific period is
found by first taking a hypothetical $1,000 investment ("initial investment") in
the Fund's shares on the first day of the period, adjusting to deduct the
maximum sales charge (in the case of Class A shares), and computing the
"redeemable value" of that investment at the end of the period. The redeemable
value in the case of Class B or Class C shares includes the effect of the
applicable contingent deferred sales charge that may be imposed at the end of
the period. The redeemable value is then divided by the initial investment, and
this quotient is taken to the Nth root (N representing the number of years in
the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains dividends
paid by the Fund have been reinvested at net asset value on the reinvestment
dates during the period. Average annual total return may also be calculated
without deducting the maximum sales charge.
Calculation of a Fund's total return is not subject to a standardized formula,
except when calculated for purposes of the Fund's "Financial Highlights" table
in the Fund's financial statements and prospectus. Total return performance for
a specific period is calculated by first taking an investment (assumed below to
be $10,000) ("initial investment") in a Fund's shares on the first day of the
period, either adjusting or not adjusting to deduct the maximum sales charge (in
the case of Class A shares), and computing the "ending value" of that investment
at the end of the period. The total return percentage is then determined by
subtracting the initial investment from the ending value and dividing the
remainder by the initial investment and expressing the result as a percentage.
The ending value in the case of Class B and Class C shares may or may not
include the effect of the applicable contingent deferred sales charge that may
be imposed at the end of the period. The calculation assumes that all income and
capital gains dividends paid by the Fund have been reinvested at net asset value
on the reinvestment dates during the period. Total return may also be shown as
the increased dollar value of the hypothetical investment over the period. Total
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return calculations that do not include the effect of the sales charge for Class
A shares or the contingent deferred sales charge for Class B and Class C shares
would be reduced if such charge were included.
A Fund's performance figures are based upon historical results and are not
representative of future performance. Each Fund's Class A shares are sold at net
asset value plus a maximum sales charge of 5.75% of the offering price. While
the maximum sales charge is normally reflected in the Fund's Class A performance
figures, certain total return calculations may not include such charge and those
results would be reduced if it were included. Class B shares and Class C shares
are sold at net asset value. Redemptions of Class B shares within the first six
years after purchase may be subject to a contingent deferred sales charge that
ranges from 4% during the first year to 0% after six years. Redemption of Class
C shares within the first year after purchase may be subject to a 1% contingent
deferred sales charge. Average annual total return figures do, and total return
figures may, include the effect of the contingent deferred sales charge for the
Class B shares and Class C shares that may be imposed at the end of the period
in question. Performance figures for the Class B shares and Class C shares not
including the effect of the applicable contingent deferred sales charge would be
reduced if it were included. Returns and net asset value will fluctuate. Factors
affecting each Fund's performance include general market conditions, operating
expenses and investment management. Any additional fees charged by a dealer or
other financial services firm would reduce the returns described in this
section. Shares of each Fund are redeemable at the then current net asset value,
which may be more or less than original cost.
A Fund's performance may be compared to that of the Consumer Price Index or
various unmanaged equity indexes including, but not limited to, the Dow Jones
Industrial Average, the Standard & Poor's 500 Stock Index, the Russell 1000(R)
Index, the Russell 1000(R) Growth Index, the Wilshire Large Company Growth
Index, the Wilshire 750 Mid Cap Company Growth Index, the Standard &
Poor's/Barra Value Index, the Standard & Poor's/Barra Growth Index, the Russell
1000(R) Value Index, the Russell 2000(R) Index, the Russell 2000(R) Value Index,
and the Russell 2000(R) Growth Index. The performance of a Fund such as the
Total Return Fund may also be compared to the combined performance of two
indexes, such as a 60%/40% combination of the Standard & Poor's 500 Stock Index
and the Lehman Brothers Government/Corporate Bond Index or for the Value+Growth
Fund to a 50%/50% combination of the Russell 2000(R) Growth Index and the
Russell 2000(R) Value Index. The performance of a Fund may also be compared to
the performance of other mutual funds or mutual fund indexes with similar
objectives and policies as reported by independent mutual fund reporting
services such as Lipper Analytical Services, Inc. ("Lipper"). Lipper performance
calculations are based upon changes in net asset value with all dividends
reinvested and do not include the effect of any sales charges.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. Also, investors
may want to compare the historical returns of various investments, performance
indexes of those investments or economic indicators, including but not limited
to stocks, bonds, certificates of deposit, money market funds and U.S. Treasury
obligations. Bank product performance may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) or various certificate of deposit indexes.
Money market fund performance may be based upon, among other things, the
IBC/Donoghue's Money Fund Report(R) or Money Market Insight(R), reporting
services on money market funds. Performance of U.S. Treasury obligations may be
based upon, among other things, various U.S. Treasury bill indexes. Certain of
these alternative investments may offer fixed rates of return and guaranteed
principal and may be insured.
A Fund may depict the historical performance of the securities in which the Fund
may invest over periods reflecting a variety of market or economic conditions
either alone or in comparison with alternative investments, performance indexes
of those investments or economic indicators. A Fund may also describe its
portfolio holdings and depict its size or relative size compared to other mutual
funds, the number and make-up of its shareholder base and other descriptive
factors concerning the Fund. The relative performance of growth stocks versus
value stocks may also be discussed.
Each Fund's returns and net asset value will fluctuate. Shares of a Fund are
redeemable by an investor at the then current net asset value, which may be more
or less than original cost. Redemption of Class B shares and Class C shares may
be subject to a contingent deferred sales charge as described above. Additional
information concerning each Fund's performance appears in the Statement of
Additional Information. Additional information about each Fund's performance
also appears in its Annual Report to Shareholders, which is available without
charge from the Fund.
27
<PAGE>
Investors may want to compare the performance of a Fund to certificates of
deposit issued by banks and other depository institutions. Certificates of
deposit may offer fixed or variable interest rates and principal is guaranteed
and may be insured. Withdrawal of deposits prior to maturity will normally be
subject to a penalty. Rates offered by banks and other depository institutions
are subject to change at any time specified by the issuing institution.
Information regarding bank products may be based upon, among other things, the
BANK RATE MONITOR National Index(TM) for certificates of deposit, which is an
unmanaged index and is based on stated rates and the annual effective yields of
certificates of deposit in the ten largest banking markets in the United States,
or the CDA Investment Technologies, Inc. Certificate of Deposit Index, which is
an unmanaged index based on the average monthly yields of certificates of
deposit.
Investors also may want to compare the performance of a Fund to that of U.S.
Treasury bills, notes or bonds. Treasury obligations are issued in selected
denominations. Rates of Treasury obligations are fixed at the time of issuance
and payment of principal and interest is backed by the full faith and credit of
the U.S. Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Information regarding the performance of Treasury obligations may be
based upon, among other things, the Towers Data Systems U.S. Treasury Bill
index, which is an unmanaged index based on the average monthly yield of
treasury bills maturing in six months. Due to their short maturities, Treasury
bills generally experience very low market value volatility.
Investors may want to compare the performance of a Fund to that of money market
funds. Money market funds seek to maintain a stable net asset value and yield
fluctuates. Information regarding the performance of money market funds may be
based upon, among other things, IBC Financial Data Inc.'s Money Fund Report(R)
(all taxable) or Money Market Insight(R). 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.
OFFICERS AND TRUSTEES
The officers and trustees of the Funds, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI are listed
below:
JAMES E. AKINS (10/15/26), Trustee, 2904 Garfield Terrace, N.W., Washington,
D.C.; Consultant on International, Political and Economic Affairs; formerly, a
career United States Foreign Service Officer, Energy Adviser for the White
House; United States Ambassador to Saudi Arabia, 1973-76.
ARTHUR R. GOTTSCHALK (2/13/25), Trustee, 10642 Brookridge Drive, Frankfort,
Illinois, Retired; formerly, President, Illinois Manufacturers Association;
Trustee, Illinois Masonic Medical Center; formerly, Illinois State Senator;
formerly, Vice President, The Reuben H. Donnelly Corp.
FREDERICK T. KELSEY (4/25/27), Trustee, 4010 Arbor Lane, Unit 402, Northfield,
Illinois; Retired; formerly, consultant to Goldman, Sachs & Co.; formerly,
President, Treasurer and Trustee of Institutional Liquid Assets and its
affiliated mutual funds; Trustee of the Benchmark Funds; formerly, Trustee of
the Pilot Funds.
THOMAS W. LITTAUER (4/26/55), Trustee and Vice President*, Two International
Place, Boston, Massachusetts; Managing Director, Adviser; Head of Broker Dealer
Division of an unaffiliated investment management firm during 1997; prior
thereto, President of Client Management Services of an unaffiliated investment
management firm from 1991 to 1996.
DANIEL PIERCE (3/18/34), Trustee and Chairman*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser.
KATHRYN L. QUIRK (12/3/52), Trustee and Vice President*, 345 Park Avenue, New
York, New York; Managing Director, Adviser.
FRED B. RENWICK (2/1/30), Trustee, 3 Hanover Square, New York, New York;
Professor of Finance, New York University, Stern School of Business; Director,
TIFF Investment Program, Inc.; Director, the Wartburg Home Foundation; Chairman,
Investment Committee of Morehouse College Board of Trustees; Chairman, American
Bible Society Investment
28
<PAGE>
Committee; formerly, member of the Investment Committee of Atlanta University
Board of Trustees; formerly, Director of Board of Pensions Evangelical Lutheran
Church of America.
JOHN B. TINGLEFF (5/4/35), Trustee, 2015 South Lake Shore Drive, Harbor Springs,
Michigan; Retired; formerly, President, Tingleff & Associates (management
consulting firm); formerly, Senior Vice President, Continental Illinois National
Bank & Trust Company.
JOHN G. WEITHERS (8/8/33), Trustee, 311 Spring Lake, Hinsdale, Illinois;
Retired; formerly, Chairman of the Board and Chief Executive Officer, Chicago
Stock Exchange; Director, Federal Life Insurance Company, President of the
Members of the Corporation and Trustee, DePaul University; Director, Systems
Imagineering, Inc.
MARK S. CASADY (9/21/60), President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly, Institutional Sales Manager
of an unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, Scudder Kemper.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, 222 South Riverside Plaza,
Chicago, Illinois; Vice President, Scudder Kemper; Vice President and Director
of State Registrations, KDI.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
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).
VALERIE F. MALTER (7/25/58), Vice President*, 345 Park Avenue, New York, New
York; Senior Vice President, Adviser.
ELIZABETH D. SMITH (10/27/46), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
WILLIAM F. TRUSCOTT (9/14/60), Vice President*, 345 Park Avenue, New York, New
York; Senior Vice President, Adviser.
JAMES M. EYSENBACH (4/1/62), Vice President*, 101 California Street, San
Francisco, California; Senior Vice President, Adviser.
* "Interested persons" 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 Fund. The information in the last column is for
calendar year 1997. The Trust has not yet adopted a Trustees compensation
schedule.
29
<PAGE>
Total Compensation
Aggregate Compensation Kemper Funds Paid
Name of Board Member from Each Fund to Board Members(2)
- -------------------- -------------- -------------------
James E. Akins $0 $106,300
Arthur R. Gottschalk(1) $0 $121,100
Frederick T. Kelsey $0 $111,300
Fred B. Renwick $0 $106,300
John B. Tingleff $0 $106,300
John G. Weithers $0 $106,300
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest
monthly at a rate equal to the yield of Zurich Money Funds -- Zurich Money
Market Fund.
(2) Includes compensation for service on the Boards of 13 Kemper funds, with
36 fund portfolios. Each trustee currently serves as a board member of 15
Kemper Funds with 51 fund portfolios. Total compensation does not reflect
amounts paid by Scudder Kemper Investments, Inc. to the board members for
meetings regarding the combination of Scudder and Zurich Kemper
Investments, Inc. Such amounts totaled $42,800, $40,100, $39,000, $42,900,
$42,900 and $42,900 for Messrs. Akins, Gorrschalk, Kelsey, Renwick,
Tingleff and Weithers, respectively.
The Board of Trustees is responsible for the general oversight of each Fund's
business. A majority of the Board's members are not affiliated with Scudder
Kemper Investments, Inc. These "Independent Trustees" have primary
responsibility for assuring that the Fund is managed in the best interests of
its shareholders.
The Board of Trustees reviews the investment performance of the Funds and other
operational matters, including policies and procedures designed to ensure
compliance with various regulatory requirements. At least annually, the
Independent Trustees review the fees paid to the Adviser and its affiliates for
investment advisory services and other administrative and shareholder services.
In this regard, they evaluate, among other things, each Fund's investment
performance, the quality and efficiency of the various other services provided,
costs incurred by the Adviser and its affiliates and comparative information
regarding fees and expenses of competitive funds. They are assisted in this
process by the Funds' independent public accountants and by independent legal
counsel selected by the Independent Trustees.
Principal Holders of Securities
As of December 29, 1998, 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 5%
or more of the outstanding shares of any class of any Fund.
SHAREHOLDER RIGHTS
Each Fund is a series of Kemper Funds Trust, a registered open-end management
investment company organized as a business trust under the laws of Massachusetts
on October 14, 1998.
The Trust may issue an unlimited number of shares of beneficial interest in one
or more series or "funds," all having $.01 par value, which may be divided by
the Board of Trustees into classes of shares. The Board of Trustees of the Trust
may authorize the issuance of additional classes and additional funds if deemed
desirable, each with its own investment objective, policies and restrictions.
Since the Trust may offer multiple funds, it is known as a "series company."
Shares of a fund have equal noncumulative voting rights and equal rights with
respect to dividends, assets and liquidation of such fund and are subject to any
preferences, rights or privileges of any classes of shares of the Portfolio.
Currently, the Trust , on behalf of each Fund, offers three classes of shares.
These are Class A, Class B and Class C shares, which have different expenses,
that may affect performance, and are available for purchase exclusively by the
following investors: (a) tax-exempt retirement plans of the Adviser and its
affiliates; and (b) the following investment advisory clients of the Adviser and
its investment advisory affiliates that invest at least $1 million in a fund:
(1) unaffiliated benefit plans, such as qualified retirement plans (other than
individual retirement accounts and self-directed retirement plans); (2)
unaffiliated banks and insurance companies purchasing for their own accounts;
and (3) endowment funds of unaffiliated non-profit organizations. Shares of the
Fund have equal noncumulative voting rights except that Class B and Class C
shares have separate and exclusive voting rights with respect to the Funds' Rule
12b-1 Plans. Shares of each class also have equal rights with respect to
dividends, assets and liquidation
30
<PAGE>
subject to any preferences (such as resulting from different Rule 12b-1
distribution fees), rights or privileges of any classes of shares of the Funds.
Shares of the Funds are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Funds are not required to hold meetings of their shareholders and have no
current intention to do so. 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 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.
Any matter shall be deemed to have been effectively acted upon with respect to a
Fund if acted upon as provided in Rule 18f-2 under the 1940 Act, or any
successor rule, and in the Trust's Declaration of Trust. As used in the
Prospectuses and in this Statement of Additional Information, the term
"majority", when referring to the approvals to be obtained from shareholders in
connection with general matters affecting the Funds and all additional
portfolios (e.g., election of directors), means the vote of the lesser of (i)
67% of the Trust's Shares represented at a meeting if the holders of more than
50% of the outstanding Shares are present in person or by proxy, or (ii) more
than 50% of the Trust's outstanding Shares. The term "majority", when referring
to the approvals to be obtained from shareholders in connection with matters
affecting a single Fund or any other single portfolio (e.g., annual approval of
investment management contracts), means the vote of the lesser of (i) 67% of the
Shares of the portfolio represented at a meeting if the holders of more than 50%
of the outstanding Shares of the portfolio are present in person or by proxy, or
(ii) more than 50% of the outstanding Shares of the portfolio.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the 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 a Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, each
Fund has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Trust's Declaration of Trust provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares entitled to vote on
a matter shall constitute a quorum. Thus, a meeting of shareholders of a Fund
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 Trust's Declaration of Trust specifically authorizes the Board of Trustees
to terminate a 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 a
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or
31
<PAGE>
obligations of each Fund and requires that notice of such disclaimer be given in
each agreement, obligation, or instrument entered into or executed by a Fund or
the Fund's trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of a Fund and each Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by Scudder Kemper remote
and not material, since it is limited to circumstances in which a disclaimer is
inoperative and such Fund itself is unable to meet its obligations.
32
<PAGE>
KEMPER FUNDS TRUST
STATEMENT OF NET ASSETS
DECEMBER 23, 1998
<TABLE>
<CAPTION>
Kemper Large Kemper Small
Company Kemper Cap Value
Growth Fund Research Fund +Growth Fund
----------- ------------- ------------
<S> <C> <C> <C>
ASSETS
Cash $33,333 $33,333 $33,334
Receivable from adviser 11,000 11,000 11,000
-----------------------------------------------------
Total Assets 44,333 44,333 44,334
LIABILITIES
Payable for organization expenses 11,000 11,000 11,000
-----------------------------------------------------
NET ASSETS $33,333 $33,333 $33,334
=====================================================
NET ASSETS REPRESENTS:
Shares of beneficial interest (unlimited number of shares authorized,
$.01 par value) outstanding:
Kemper Large Kemper Kemper Small
Company Research Cap Value
Growth Fund Fund +Growth Fund
----------- ---- ------------
Class A 1,169.579 1,169.579 1,169.614
Class B 1,169.579 1,169.579 1,169.614
Class C 1,169.579 1,169.579 1,169.614 $35 $35 $35
Capital in excess of par value 33,298 33,298 33,299
-----------------------------------------------------
$33,333 $33,333 $33,334
======================================================
THE PRICING OF SHARES
Net asset value and redemption price per share,
<PAGE>
applicable to Kemper Large Company Growth Fund
and Kemper Research Fund:
Class A ($11,111/ 1169.579 shares outstanding) $9.50
Class B* ($11,111/ 1169.579 shares outstanding) $9.50
Class C* ($11,111/ 1169.579 shares outstanding) $9.50
Net asset value and redemption price per share,
applicable to Kemper Small Cap Value+Growth Fund:
Class A ($11,111/ 1169.614 shares outstanding) $9.50
Class B* ($11,111/ 1169.614 shares outstanding) $9.50
Class C* ($11,112/ 1169.614 shares outstanding) $9.50
Maximum offering price per share, applicable to all Funds:
Class A (net asset value, plus 6.10% of net
asset value or 5.75% of offering price) $10.08
Class B * (net asset value) $9.50
Class C* (net asset value) $9.50
* Subject to contingent deferred sales charge.
2
<PAGE>
KEMPER FUNDS TRUST
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM NOVEMBER 18, 1998
TO DECEMBER 23, 1998
Kemper Large Kemper Small
Company Kemper Cap Value
Growth Fund Research Fund +Growth Fund
----------- ------------- ------------
INVESTMENT INCOME $0 $0 $0
EXPENSES
Organization expenses 11,000 11,000 11,000
Reimbursement of expenses (11,000) (11,000) (11,000)
-----------------------------------------------------
Net expenses 0 0 0
-----------------------------------------------------
NET INVESTMENT INCOME $0 $0 $0
=====================================================
</TABLE>
Notes:
1. Kemper Funds Trust (the "Trust"), an open-end management investment company
registered under the Investment Company Act of 1940, was organized as a
business trust under the laws of Massachusetts on October 14, 1998. Each of
the funds was formed on November 18, 1998. All Class A, Class B and Class C
shares of beneficial interest of each Fund were issued to Scudder Kemper
Investments, Inc., the investment manager, on December 23, 1998.
2. Scudder Kemper Investments, Inc. has agreed to reimburse and absorb all
expenses of the Funds incurred prior to commencement of operations.
3. The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management
estimates. Actual results may differ from those estimates.
3
<PAGE>
KEMPER FUNDS TRUST:
KEMPER LARGE COMPANY GROWTH FUND
KEMPER RESEARCH FUND
KEMPER SMALL CAP VALUE+GROWTH FUND
PART C
------
OTHER INFORMATION
-----------------
<TABLE>
<CAPTION>
Item 23 Exhibits
- ------- --------
<S> <C> <C>
(a) Declaration of Trust, dated October 14, 1998, is filed herein.
(b) By-Laws, dated October 14, 1998, are filed herein.
(c) Establishment and Designation of Series of Beneficial Interest,
dated October 14, 1998, is filed herein.
(d)(1) Investment Management Agreement between the Registrant, on behalf
of Kemper Large Company Growth Fund, and Scudder Kemper
Investments, dated December 28, 1998, is filed herein.
(d)(2) Investment Management Agreement between the Registrant, on behalf
of Kemper Research Fund, and Scudder Kemper Investments, dated
December 28, 1998 is filed herein.
(d)(3) Investment Management Agreement between the Registrant, on behalf
of Kemper Small Cap Value+Growth Fund, and Scudder Kemper
Investments, dated December 28, 1998 is filed herein.
(e)(1) Underwriting and Distribution Services Agreement between the
Registrant and Kemper Distributors, Inc., dated December 28, 1998
is filed herein.
(f) Inapplicable.
(g)(1) Form of Custody Agreement between the Registrant and State Street
Bank and Trust Company is filed herein.
(h)(1) Agency Agreement dated December 28, 1998 is filed herein.
(h)(2) Administrative Services Agreement, dated December 28, 1998, is
filed herein.
(h)(3) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Large Company Growth Fund, and Scudder Fund
Accounting Corp., dated December 28, 1998, is filed herein.
(h)(4) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Research Fund, and Scudder Fund Accounting Corp.,
dated December 28, 1998, is filed herein.
(h)(5) Fund Accounting Services Agreement between the Registrant, on
behalf of Kemper Small Cap Value+Growth Fund, and Scudder Fund
Accounting Corp., dated December 28, 1998, is filed herein.
(i) Legal Opinion and Consent of Dechert, Price & Rhoads, counsel to
2
<PAGE>
the funds, dated December 29, 1998, is filed herein.
(j)(1) Consent of Independent Auditors is filed herein.
(j)(2) Report of Independent Auditors is filed herein.
(k) Inapplicable.
(l) Purchase Agreement between Kemper Funds Trust and Scudder Kemper
Investments, Inc. dated December 23, 1998, is filed herein.
(m)(1) 12b-1 Plan between Kemper Large Company Growth Fund (Class B
shares)and Kemper Distributors, Inc., dated December 28, 1998, is
filed herein.
(m)(2) 12b-1 Plan between Kemper Large Company Growth Fund (Class C
shares) and Kemper Distributors, Inc., dated December 28, 1998, is
filed herein.
(m)(3) 12b-1 Plan between Kemper Research Fund (Class B shares)and Kemper
Distributors, Inc., dated December 28, 1998, is filed herein.
(m)(4) 12b-1 Plan between Kemper Research Fund (Class C shares) and Kemper
Distributors, Inc., dated December 28, 1998, is filed herein.
(m)(5) 12b-1 Plan between Kemper Small Cap Value+Growth Fund (Class B
shares)and Kemper Distributors, Inc., dated December 28, 1998, is
filed herein.
(m)(6) 12b-1 Plan between Kemper Small Cap Value+Growth Fund (Class C
shares) and Kemper Distributors, Inc., dated December 28, 1998, is
filed herein.
(n) Inapplicable
(o) Multi-Distribution System Plan, dated December 28, 1998, is filed
herein.
</TABLE>
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 28.
Business and Other Connections of Board
Name of Directors of Registrant's Adviser
---- ------------------------------------
<TABLE>
<CAPTION>
<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**
3
<PAGE>
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
William H. Bolinder Director, Scudder Kemper Investments, Inc.**
Member, Group Executive Board, Zurich Financial Services, Inc.##
Chairman, Zurich-American Insurance Company o
Laurence W. Cheng Director, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, ZKI Holding Corporation xx
Gunther Gose Director, Scudder Kemper Investments, Inc.**
CFO and Member, Group Executive Board, Zurich Financial Services, Inc.##
CEO/Branch Offices, Zurich Life Insurance Company##
Rolf Huppi Director, Chairman of the Board, Scudder Kemper Investments, Inc.**
Member, Corporate Executive Board, Zurich Insurance Company of Switzerland##
Director, Chairman of the Board, Zurich Holding Company of America o
Director, ZKI Holding Corporation xx
Kathryn L. Quirk Chief Legal Officer, Chief Compliance Officer and Secretary, Scudder Kemper
Investments, Inc.**
Director, Senior Vice President & Assistant Clerk, Scudder Investor Services, Inc.*
Director, Vice President & Secretary, Scudder Fund Accounting Corporation*
Director, Vice President & Secretary, Scudder Realty Holdings Corporation*
Director & Assistant Clerk, Scudder Service Corporation*
Director, SFA, Inc.*
Vice President, Director & Assistant Secretary, Scudder Precious Metals, Inc.***
Director, Scudder, Stevens & Clark Japan, Inc.***
Director, Vice President and Secretary, Scudder, Stevens & Clark of Canada, Ltd.***
Director, Vice President and Secretary, Scudder Canada Investor Services Limited***
Director, Vice President and Secretary, Scudder Realty Advisers, Inc. x
Director and Secretary, Scudder, Stevens & Clark Corporation**
Director and Secretary, Scudder, Stevens & Clark Overseas Corporation oo
Director and Secretary, SFA, Inc.*
Director, Vice President and Secretary, Scudder Defined Contribution Services, Inc.**
Director, Vice President and Secretary, Scudder Capital Asset Corporation**
Director, Vice President and Secretary, Scudder Capital Stock Corporation**
Director, Vice President and Secretary, Scudder Capital Planning Corporation**
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
4
<PAGE>
* 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
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
</TABLE>
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.
(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
Elizabeth C. Werth Vice President Assistant Secretary
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and
Secretary
5
<PAGE>
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Daniel Pierce Director, Chairman Trustee
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None
(c) Not applicable
</TABLE>
6
<PAGE>
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
- ---- --- -------------------
Not applicable.
Item 30. Undertakings
- ---- --- ------------
Not applicable.
7
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this amendment to its Registration
Statement pursuant to Rule 472 under the Securities Act of 1933 and has duly
caused this amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Boston and the
Commonwealth of Massachusetts on the 30th day of December 30, 1998.
KEMPER FUNDS TRUST
By /s/ Philip J. Collora
-------------------------------
Philip J. Collora
Vice President and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
amendment to its Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Mark S. Casady
- --------------------------------------
Mark S. Casady President (Principal Executive December 30, 1998
Officer)
/s/ Daniel Pierce
- --------------------------------------
Daniel Pierce Chairman and Trustee December 30, 1998
/s/ James E. Akins
- --------------------------------------
James E. Akins Trustee December 30, 1998
/s/ Arthur R. Gottschalk
- --------------------------------------
Arthur R. Gottschalk Trustee December 30, 1998
/s/ Frederick T. Kelsey
- --------------------------------------
Frederick T. Kelsey Trustee December 30, 1998
/s/ Thomas W. Littauer
- --------------------------------------
Thomas W. Littauer Trustee December 30, 1998
/s/ Kathryn L. Quirk
- --------------------------------------
Kathryn L. Quirk Trustee, Vice President December 30, 1998
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ Fred B. Renwick
- --------------------------------------
Fred B. Renwick Trustee December 30, 1998
/s/ John B. Tingleff
- --------------------------------------
John B. Tingleff Trustee December 30, 1998
/s/ John G. Weithers
- --------------------------------------
John G. Weithers Trustee December 30, 1998
/s/ John R. Hebble
- --------------------------------------
John R. Hebble Treasurer December 30, 1998
</TABLE>
2
<PAGE>
File No. 333-65661
File No. 811-09057
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
PRE-EFFECTIVE AMENDMENT NO. 1
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO.
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
KEMPER FUNDS TRUST
8
<PAGE>
KEMPER FUNDS TRUST
EXHIBIT INDEX
Exhibit (a)
Exhibit (b)
Exhibit (c)
Exhibit (d)(1)
Exhibit (d)(2)
Exhibit (d)(3)
Exhibit (e)(1)
Exhibit (g)(1)
Exhibit (h)(1)
Exhibit (h)(2)
Exhibit (h)(3)
Exhibit (h)(4)
Exhibit (h)(5)
Exhibit (i)
Exhibit (j)(1)
Exhibit (j)(2)
Exhibit (l)
Exhibit (m)(1)
Exhibit (m)(2)
Exhibit (m)(3)
Exhibit (m)(4)
Exhibit (m)(5)
Exhibit (m)(6)
Exhibit (o)
9
Exhibit (a)
KEMPER FUNDS TRUST
DECLARATION OF TRUST
DATED OCTOBER 14, 1998
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I................................................................................................1
Section 1.1. Name...............................................................................1
Section 1.2. Definitions........................................................................1
ARTICLE II...............................................................................................3
Section 2.1. General Powers.....................................................................3
Section 2.2. Investments........................................................................4
Section 2.3. Legal Title........................................................................5
Section 2.4. Issuance and Repurchase of Shares..................................................6
Section 2.5. Delegation; Committees.............................................................6
Section 2.6. Collection and Payment.............................................................6
Section 2.7. Expenses...........................................................................6
Section 2.8. Manner of Acting; By-laws..........................................................6
Section 2.9. Miscellaneous Powers...............................................................7
Section 2.10. Principal Transactions............................................................7
Section 2.11. Number of Trustees................................................................8
Section 2.12. Election and Term.................................................................8
Section 2.13. Resignation and Removal...........................................................8
Section 2.14. Vacancies.........................................................................8
Section 2.15. Delegation of Power to Other Trustees.............................................9
Section 2.16. Shareholder Vote, etc.............................................................9
ARTICLE III..............................................................................................9
Section 3.1. Distribution Contract..............................................................9
Section 3.2. Advisory or Management Contract...................................................10
Section 3.3. Affiliations of Trustees or Officers, Etc.........................................10
Section 3.4. Compliance with 1940 Act..........................................................11
ARTICLE IV..............................................................................................11
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc..............................11
Section 4.2. Non-Liability of Trustees, Etc....................................................11
Section 4.3. Mandatory Indemnification.........................................................12
Section 4.4. No Bond Required of Trustees......................................................13
Section 4.5. No Duty of Investigation; Notice in Trust Instruments, Etc........................13
Section 4.6. Reliance on Experts, Etc..........................................................14
<PAGE>
ARTICLE V...............................................................................................14
Section 5.1. Beneficial Interest...............................................................14
Section 5.2. Rights of Shareholders............................................................14
Section 5.3. Trust Only........................................................................15
Section 5.4. Issuance of Shares................................................................15
Section 5.5. Register of Shares................................................................15
Section 5.6. Transfer of Shares................................................................15
Section 5.7. Notices, Reports..................................................................16
Section 5.8. Treasury Shares...................................................................16
Section 5.9. Voting Powers.....................................................................16
Section 5.10. Meetings of Shareholders.........................................................17
Section 5.11. Series Designation...............................................................17
Section 5.12. Assent to Declaration of Trust...................................................19
Section 5.13. Class Designation................................................................19
ARTICLE VI..............................................................................................20
Section 6.1. Redemption of Shares..............................................................20
Section 6.2. Price.............................................................................21
Section 6.3. Payment...........................................................................21
Section 6.4. Effect of Suspension of Determination of Net Asset Value..........................21
Section 6.5. Repurchase by Agreement...........................................................21
Section 6.6. Redemption of Shareholder's Interest..............................................21
Section 6.7. Redemption of Shares in Order to Qualify as Regulated Investment Company;
Disclosure of Holding .........................................................22
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net Asset Value Formula....22
Section 6.9. Suspension of Right of Redemption.................................................22
ARTICLE VII.............................................................................................23
Section 7.1. Net Asset Value...................................................................23
Section 7.2. Distributions to Shareholders.....................................................24
Section 7.3. Determination of Net Income; Constant Net Asset Value; Reduction of Outstanding
Shares ........................................................................24
Section 7.4. Allocation Between Principal and Income...........................................25
Section 7.5. Power to Modify Foregoing Procedures..............................................25
ARTICLE VIII............................................................................................25
Section 8.1. Duration..........................................................................25
Section 8.2. Termination of Trust..............................................................26
Section 8.3. Amendment Procedure...............................................................26
Section 8.4. Merger, Consolidation and Sale of Assets..........................................27
Section 8.5. Incorporation.....................................................................27
ii
<PAGE>
ARTICLE IX..............................................................................................28
ARTICLE X...............................................................................................28
Section 10.1. Filing...........................................................................28
Section 10.2. Governing Law....................................................................29
Section 10.3. Counterparts.....................................................................29
Section 10.4. Reliance by Third Parties........................................................29
Section 10.5. Provisions in Conflict with Law or Regulations...................................29
</TABLE>
iii
<PAGE>
DECLARATION OF TRUST
OF
KEMPER FUNDS TRUST
DATED OCTOBER 14, 1998
DECLARATION OF TRUST made October 14, 1998 by the Trustees (together
with all other persons from time to time duly elected, qualified and serving as
Trustees in accordance with the provisions of Article II hereof, the
"Trustees").
WHEREAS, the Trustees desire to establish a trust for the investment
and reinvestment of funds contributed thereto;
WHEREAS, the Trustees desire that the beneficial interest in the trust
assets be divided into transferable shares of beneficial interest, as
hereinafter provided;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust established hereunder shall be held and managed in
trust for the benefit of the holders, from time to time, of the shares of
beneficial interest issued hereunder and subject to the provisions hereof.
ARTICLE I
NAME AND DEFINITIONS
--------------------
Section 1.1. Name.
-----------------------
The name of the Trust created hereby is the "Kemper Funds Trust".
Section 1.2. Definitions.
------------------------------
Wherever they are used herein, the following terms have the following
respective meanings:
(a) "By-laws" means the By-laws referred to in Section 2.8
hereof, as from time to time amended.
(b) "Class" means the two or more Classes as may be
established and designated from time to time by the Trustees
pursuant to Section 5.13 hereof.
(c) The term "Commission" has the meaning given it in the 1940
Act. The term "Interested Person" has the meaning given it in
the 1940 Act, as modified by any applicable order or orders of
the Commission. Except as otherwise defined by the Trustees in
conjunction with the establishment of any series of Shares,
the term "vote of a majority of the Shares outstanding and
entitled to vote" shall have the
<PAGE>
same meaning as the term "vote of a majority of the
outstanding voting securities" given it in the 1940 Act.
(d) "Custodian" means any Person other than the Trust who has
custody of any Trust Property as required by Section 17(f) of
the 1940 Act, but does not include a system for the central
handling of securities described in said Section 17(f).
(e) "Declaration" means this Declaration of Trust as further
amended from time to time. Reference in this Declaration of
Trust to "Declaration," "hereof," "herein," and "hereunder"
shall be deemed to refer to this Declaration rather than
exclusively to the article or section in which such words
appear.
(f) "Distributor" means the party, other than the Trust, to
the contract described in Section 3.1 hereof.
(g) "His" shall include the feminine and neuter, as well as
the masculine genders.
(h) "Investment Adviser" means the party, other than the
Trust, to the contract described in Section 3.2 hereof.
(i) "Municipal Bonds" means obligations issued by or on behalf
of states, territories of the United States and the District
of Columbia and their political subdivisions, agencies and
instrumentalities, or other issuers, the interest from which
is exempt from regular Federal income tax.
(j) The "1940 Act" means the Investment Company Act of 1940,
as amended from time to time.
(k) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
(l) "Series" individually or collectively means the two or
more Series as may be established and designated from time to
time by the Trustees pursuant to Section 5.11 hereof. Unless
the context otherwise requires, the term "Series" shall
include Classes into which shares of the Trust, or of a
Series, may be divided from time to time.
(m) "Shareholder" means a record owner of Outstanding Shares.
(n) "Shares" means the equal proportionate units of interest
into which the beneficial interest in the Trust shall be
divided from time to time, including the Shares of any and all
Series and Classes which may be established by the Trustees
2
<PAGE>
and includes fractions of Shares as well as whole Shares.
"Outstanding Shares" means those Shares shown as of a time and
from time to time on the books of the Trust or its Transfer
Agent as then issued and outstanding, but shall not include
Shares which have been redeemed or repurchased by the Trust
and which are at the time held in the Treasury of the Trust.
(o) "Transfer Agent" means any one or more Persons other than
the Trust who maintains the Shareholder records of the Trust,
such as the list of Shareholders, the number of Shares
credited to each account, and the like.
(p) The "Trust" means the Kemper Funds Trust.
(q) The "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or
for the account of the Trust or the Trustees.
(r) The "Trustees" means the person or persons who has or have
signed this Declaration, so long as he or they shall continue
in office in accordance with the terms hereof, and all other
persons who may from time to time be duly qualified and
serving as Trustees in accordance with the provisions of
Article II hereof, and reference herein to a Trustee or the
Trustees shall refer to such person or persons in this
capacity or their capacities as trustees hereunder.
ARTICLE II
TRUSTEES
--------
Section 2.1. General Powers.
---------------------------------
The Trustees shall have exclusive and absolute control over the Trust
Property and over the business of the Trust to the same extent as if the
Trustees were the sole owners of the Trust Property and business in their own
right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees shall have power to conduct the business of the Trust
and carry on its operations in any and all of its branches and maintain offices
both within and without the Commonwealth of Massachusetts, in any and all states
of the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination as
to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees.
3
<PAGE>
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 2.2. Investments.
------------------------------
The Trustees shall have the power:
(a) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate
to the conduct of such operations.
(b) To invest in, hold for investment, or reinvest in,
securities, including shares of open-end investment companies;
common and preferred stocks; warrants; bonds, debentures,
bills, time notes and all other evidences of indebtedness;
negotiable or non-negotiable instruments; government
securities, including securities of any state, municipality or
other political subdivision thereof, or any governmental or
quasi-governmental agency or instrumentality; and money market
instruments including bank certificates of deposit, finance
paper, commercial paper, bankers acceptances and all kinds of
repurchase agreements, of any corporation, company, trust,
association, firm or other business organization however
established, and of any country, state, municipality or other
political subdivision, or any governmental or
quasi-governmental agency or instrumentality.
(c) To acquire (by purchase, subscription or otherwise), to
hold, to trade in and deal in, to acquire any rights or
options to purchase or sell, to sell or otherwise dispose of,
to lend, and to pledge any such securities and to enter into
repurchase agreements and forward foreign currency exchange
contracts, to purchase and sell futures contracts on
securities, securities indices and foreign currencies, to
purchase or sell options on such contracts, foreign currency
contracts, and foreign currencies and to engage in all types
of hedging and risk management transactions.
(d) To exercise all rights, powers and privileges of ownership
or interest in all securities, repurchase agreements, futures
contracts and options and other assets included in the Trust
Property, including the right to vote thereon and otherwise
act with respect thereto and to do all acts for the
preservation, protection, improvement and enhancement in value
of all such assets.
(e) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale or otherwise)
any property, real or personal, including cash, and any
interest therein.
(f) To borrow money and in this connection issue notes or
other evidence of indebtedness; to secure borrowings by
mortgaging, pledging or otherwise subjecting as security the
Trust Property; to endorse, guarantee, or undertake the
4
<PAGE>
performance of any obligation or engagement of any other
Person and to lend Trust Property.
(g) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in
which is included in the Trust Property or in the affairs of
which the Trustees have any direct or indirect interest; to do
all acts and things designed to protect, preserve, improve or
enhance the value of such obligation or interest, and to
guarantee or become surety on any or all of the contracts,
stocks, bonds, notes, debentures and other obligations of any
such corporation, company, trust, association or firm.
(h) To enter into a plan of distribution and any related
agreements whereby the Trust may finance directly or
indirectly any activity which is primarily intended to result
in the sale of Shares.
(i) To invest, through a transfer of cash, securities and
other assets or otherwise, all or a portion of the Trust
Property, or to sell all or a portion of the Trust Property
and invest the proceeds of such sales, in another investment
company that is registered under the 1940 Act.
(j) In general to carry on any other business in connection
with or incidental to any of the foregoing powers, to do
everything necessary, suitable or proper for the
accomplishment of any purpose or the attainment of any object
or the furtherance of any power hereinbefore set forth, either
alone or in association with others, and to do every other act
or thing incidental or appurtenant to or growing out of or
connected with the aforesaid business or purposes, objects or
powers.
The foregoing clauses shall be construed both as objects and powers,
and the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Trustees.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries.
Section 2.3. Legal Title.
------------------------------
Legal title to all the Trust Property, including the property of any
Series of the Trust, shall be vested in the Trustees as joint tenants except
that the Trustees shall have power to cause legal title to any Trust Property to
be held by or in the name of one or more of the Trustees, or in the name of the
Trust, or in the name of any other Person as nominee, on such terms as the
Trustees may determine, provided that the interest of the Trust therein is
deemed appropriately protected. The right, title and interest of the Trustees in
the Trust Property and the property of each Series of the Trust shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office, resignation, removal or death of a Trustee he
shall
5
<PAGE>
automatically cease to have any right, title or interest in any of the Trust
Property or the property of any Series of the Trust, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered.
Section 2.4. Issuance and Repurchase of Shares.
----------------------------------------------------
The Trustees shall have the power to issue, sell, repurchase, redeem,
retire, cancel, acquire, hold, resell, reissue, dispose of, transfer, and
otherwise deal in Shares and, subject to the provisions set forth in Articles VI
and VII and Section 5.11 hereof, to apply to any such repurchase, redemption,
retirement, cancellation or acquisition of Shares any funds or property of the
particular series of the Trust with respect to which such Shares are issued,
whether capital or surplus or otherwise, to the full extent now or hereafter
permitted by the laws of the Commonwealth of Massachusetts governing business
corporations.
Section 2.5. Delegation; Committees.
-----------------------------------------
The Trustees shall have power to delegate from time to time to such of
their number or to officers, employees or agents of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Trustees or otherwise as the Trustees may deem expedient, to
the same extent as such delegation is permitted by the 1940 Act.
Section 2.6. Collection and Payment.
-----------------------------------------
The Trustees shall have power to collect all property due to the Trust;
to pay all claims, including taxes, against the Trust Property; to prosecute,
defend, compromise or abandon any claims relating to the Trust Property; to
foreclose any security interest securing any obligations, by virtue of which any
property is owed to the Trust; and to enter into releases, agreements and other
instruments.
Section 2.7. Expenses.
---------------------------
The Trustees shall have the power to incur and pay any expenses which
in the opinion of the Trustees are necessary or incidental to carry out any of
the purposes of this Declaration, and to pay reasonable compensation from the
funds of the Trust to themselves as Trustees. The Trustees shall fix the
compensation of all officers, employees and Trustees.
Section 2.8. Manner of Acting; By-laws.
--------------------------------------------
Except as otherwise provided herein or in the By-laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment by
means of which all persons participating in the meeting can hear each other, or
by written consents of the entire number of Trustees then in office. The
Trustees may adopt By-laws not inconsistent with this Declaration to provide for
the conduct of the
6
<PAGE>
business of the Trust and may amend or repeal such By-laws to the extent such
power is not reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8 and in
addition to such provisions or any other provision of this Declaration or of the
By-laws, the Trustees may by resolution appoint a committee consisting of less
than the whole number of Trustees then in office, which committee may be
empowered to act for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with respect to the
institution, prosecution, dismissal, settlement, review or investigation of any
action, suit or proceeding which shall be pending or threatened to be brought
before any court, administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers.
---------------------------------------
Subject to Section 5.11 hereof, the Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, elect and remove such officers and
appoint and terminate such agents or employees as they consider appropriate, and
appoint from their own number, and terminate, any one or more committees which
may exercise some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust Property,
insurance policies insuring the Shareholders, Trustees, officers, employees,
agents, investment advisers, distributors, selected dealers or independent
contractors of the Trust against all claims arising by reason of holding any
such position or by reason of any action taken or omitted by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) to the extent permitted by law, indemnify any person with whom
the Trust has dealings, including the Investment Adviser, Distributor, Transfer
Agent and selected dealers, to such extent as the Trustees shall determine; (g)
guarantee indebtedness or contractual obligations of others; (h) determine and
change the fiscal year of the Trust and the method by which its accounts shall
be kept; and (i) adopt a seal for the Trust, but the absence of such seal shall
not impair the validity of any instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions.
-----------------------------------------
Except in transactions not permitted by the 1940 Act or rules and
regulations adopted by the Commission, the Trustees may, on behalf of the Trust,
buy any securities from or sell any securities to, or lend any assets of the
Trust to, any Trustee or officer of the Trust or any firm of which any such
Trustee or officer is a member acting as principal, or have any such dealings
with the Investment Adviser, Distributor or transfer agent or with any
Interested Person or such Person; and the Trust may employ any such Person, or
firm or company in which such Person is
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an Interested Person, as broker, dealer, legal counsel, registrar, transfer
agent, dividend disbursing agent or Custodian upon customary terms.
Section 2.11. Number of Trustees.
-------------------------------------
The number of Trustees shall initially be one (1), and thereafter shall
be such number as shall be fixed from time to time by a written instrument
signed by a majority of the Trustees.
Section 2.12. Election and Term.
------------------------------------
Except for the Trustees named herein or appointed to fill vacancies
pursuant to Section 2.14 hereof, the Trustees shall be elected by the
Shareholders owning of record a plurality of the Shares voting at a meeting of
Shareholders. Such a meeting shall be held on a date fixed by the Trustees.
Except in the event of resignation or removals pursuant to Section 2.13 hereof,
each Trustee shall hold office until such time as less than a majority of the
Trustees holding office have been elected by Shareholders, and thereafter until
the holding of a Shareholders' meeting as required by the next following
sentence. In such event the Trustees then in office will call a Shareholders'
meeting for the election of Trustees. Except for the foregoing circumstances,
the Trustees shall continue to hold office and may appoint successor Trustees.
Section 2.13. Resignation and Removal.
------------------------------------------
Any Trustee may resign his trust (without the need for any prior or
subsequent accounting) by an instrument in writing signed by him and delivered
to the other Trustees and such resignation shall be effective upon such
delivery, or at a later date according to the terms of the instrument. Any of
the Trustees may be removed (provided the aggregate number of Trustees after
such removal shall not be less than one) with cause, by the action of two-thirds
of the remaining Trustees. Any Trustee may be removed at any meeting of
Shareholders by vote of two-thirds of the Outstanding Shares. The Trustees shall
promptly call a meeting of the shareholders for the purpose of voting upon the
question of removal of any such Trustee or Trustees when requested in writing so
to do by the holders of not less than ten percent of the Outstanding Shares and,
in that connection, the Trustees will assist shareholder communications to the
extent provided for in Section 16(c) under the 1940 Act. Upon the resignation or
removal of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute
and deliver such documents as the remaining Trustees shall require for the
purpose of conveying to the Trust or the remaining Trustees any Trust Property
or property of any series of the Trust held in the name of the resigning or
removed Trustee. Upon the incapacity or death of any Trustee, his legal
representative shall execute and deliver on his behalf such documents as the
remaining Trustees shall require as provided in the preceding sentence.
Section 2.14. Vacancies.
----------------------------
The term of office of a Trustee shall terminate and a vacancy shall
occur in the event of the death, resignation, removal, bankruptcy, adjudicated
incompetence or other incapacity to perform the duties of the office of a
Trustee. No such vacancy shall operate to annul the
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Declaration or to revoke any existing agency created pursuant to the terms of
the Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees shall fill
such vacancy by the appointment of such other person as they in their discretion
shall see fit, made by a written instrument signed by a majority of the Trustees
then in office. Any such appointment shall not become effective, however, until
the person named in the written instrument of appointment shall have accepted in
writing such appointment and agreed in writing to be bound by the terms of the
Declaration. An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement, resignation or
increase in the number of Trustees, provided that such appointment shall not
become effective prior to such retirement, resignation or increase in the number
of Trustees. Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.14, the Trustees in office,
regardless of their number, shall have all the powers granted to the Trustees
and shall discharge all the duties imposed upon the Trustees by the Declaration.
A written instrument certifying the existence of such vacancy signed by a
majority of the Trustees in office shall be conclusive evidence of the existence
of such vacancy.
Section 2.15. Delegation of Power to Other Trustees.
--------------------------------------------------------
Any Trustee may, by power of attorney, delegate his power for a period
not exceeding six (6) months at any one time to any other Trustee or Trustees;
provided that in no case shall less than two (2) Trustees personally exercise
the powers granted to the Trustees under this Declaration except as herein
otherwise expressly provided.
Section 2.16. Shareholder Vote, etc. Not Required.
------------------------------------------------------
Except to the extent specifically provided to the contrary in this
Declaration, the Trustees may exercise each of the powers granted to them in
this Declaration without the vote, approval or agreement of the Shareholders,
unless such a vote, approval or agreement is required by the 1940 Act or
applicable laws of the Commonwealth of Massachusetts.
ARTICLE III
CONTRACTS
---------
Section 3.1. Distribution Contract.
----------------------------------------
The Trustees may in their discretion from time to time enter into an
exclusive or non-exclusive underwriting contract or contracts providing for the
sale of the Shares at a price based on the net asset value of a Share, whereby
the Trustees may either agree to sell the Shares to the other party to the
contract or appoint such other party their sales agent for the Shares, and in
either case on such terms and conditions, if any, as may be prescribed in the
By-laws, and such further terms and conditions as the Trustees may in their
discretion determine not inconsistent with the provisions of this Article III or
of the By-laws; and such contract may also provide for the repurchase of the
Shares by such other party as agent of the Trustees.
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Section 3.2. Advisory or Management Contract.
--------------------------------------------------
The Trustees may in their discretion from time to time enter into an
investment advisory or management contract or separate advisory contracts with
respect to one or more Series whereby the other party to such contract shall
undertake to furnish to the Trust such management, investment advisory,
statistical and research facilities and services and such other facilities and
services, if any, and all upon such terms and conditions as the Trustees may in
their discretion determine, including the grant of authority to such other party
to determine what securities shall be purchased or sold by the Trust and what
portion of its assets shall be uninvested, which authority shall include the
power to make changes in the investments of the Trust or any Series.
The Trustees may also employ, or authorize the Investment Adviser to
employ, one or more sub-advisers from time to time to perform such of the acts
and services of the Investment Adviser and upon such terms and conditions as may
be agreed upon between the Investment Adviser and such sub-advisers and approved
by the Trustees. Any reference in this Declaration to the Investment Adviser
shall be deemed to include such sub-advisers unless the context otherwise
requires.
Section 3.3. Affiliations of Trustees or Officers, Etc.
------------------------------------------------------------
The fact that:
(i) any of the Shareholders, Trustees or officers of
the Trust is a shareholder, director, officer,
partner, trustee, employee, manager, adviser or
distributor of or for any partnership, corporation,
trust, association or other organization or of or for
any parent or affiliate of any organization, with
which a contract of the character described in
Sections 3.1 or 3.2 above or for services as
Custodian, Transfer Agent, accounting agent or
disbursing agent or for related services may have
been or may hereafter be made, or that any such
organization, or any parent or affiliate thereof, is
a Shareholder of or has an interest in the Trust, or
that
(ii) any partnership, corporation, trust, association
or other organization with which a contract of the
character described in Sections 3.1 or 3.2 above or
for services as Custodian, Transfer Agent, accounting
agent or disbursing agent or for related services may
have been or may hereafter be made also has any one
or more of such contracts with one or more other
partnerships, corporations, trusts, associations or
other organizations, or has other business or
interests, shall not affect the validity of any such
contract or disqualify any Shareholder, Trustee or
officer of the Trust from voting upon or executing
the same or create any liability or accountability to
the Trust or its Shareholders.
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Section 3.4. Compliance with 1940 Act.
-------------------------------------------
Any contract entered into pursuant to Sections 3.1 or 3.2 shall be
consistent with and subject to the requirements of Section 15 of the 1940 Act
(including any amendment thereof or other applicable act of Congress hereafter
enacted), as modified by any applicable order or orders of the Commission, with
respect to its continuance in effect, its termination and the method of
authorization and approval of such contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
-------------------
Section 4.1. No Personal Liability of Shareholders, Trustees, Etc.
-----------------------------------------------------------------------
No Shareholder shall be subject to any personal liability whatsoever to
any Person in connection with Trust Property or the acts, obligations or affairs
of the Trust. No Trustee, officer, employee or agent of the Trust shall be
subject to any personal liability whatsoever to any Person, other than to the
Trust or its Shareholders, in connection with Trust Property or the affairs of
the Trust, save only that arising from bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties with respect to such Person; and
all such Persons shall look solely to the Trust Property for satisfaction of
claims of any nature arising in connection with the affairs of the Trust. If any
Shareholder, Trustee, officer, employee, or agent, as such, of the Trust, is
made a party to any suit or proceeding to enforce any such liability of the
Trust, he shall not, on account thereof, be held to any personal liability. The
Trust shall indemnify and hold each Shareholder harmless from and against all
claims and liabilities, to which such Shareholder may become subject by reason
for his being or having been a Shareholder, and shall reimburse such Shareholder
for all legal and other expenses reasonably incurred by him in connection with
any such claim or liability. The indemnification and reimbursement required by
the preceding sentence shall be made only out of the assets of the one or more
Series of which the Shareholder who is entitled to indemnification or
reimbursement was a Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The rights accruing
to a Shareholder under this Section 4.1 shall not impair any other right to
which such Shareholder may be lawfully entitled, nor shall anything herein
contained restrict the right of the Trust to indemnify or reimburse a
Shareholder in any appropriate situation even though not specifically provided
herein.
Section 4.2. Non-Liability of Trustees, Etc.
-------------------------------------------------
No Trustee, officer, employee or agent of the Trust shall be liable to
the Trust, its Shareholders, or to any Shareholder, Trustee, officer, employee,
or agent thereof for any action or failure to act (including without limitation
the failure to compel in any way any former or acting Trustee to redress any
breach of trust) except for his own bad faith, willful misfeasance, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
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Section 4.3. Mandatory Indemnification.
--------------------------------------------
(a) Subject to the exceptions and limitations contained in
paragraph (b) below:
(i) every person who is, or has been, a Trustee or
officer of the Trust shall be indemnified by the
Trust to the fullest extent permitted by law against
all liability and against all expenses reasonably
incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his
being or having been a Trustee or officer and against
amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or
"proceeding" shall apply to all claims, actions,
suits or proceedings (civil, criminal, administrative
or other, including appeals), actual or threatened;
and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs,
judgments, amounts paid in settlement, fines,
penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
(i) against any liability to the Trust, a Series
thereof, or the Shareholders by reason of a final
adjudication by a court or other body before which a
proceeding was brought that he engaged in willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of
his office;
(ii) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in
good faith in the reasonable belief that his action
was in the best interest of the Trust;
(iii) in the event of a settlement or other
disposition not involving a final adjudication as
provided in paragraph (b)(i) or (b)(ii) resulting in
a payment by a Trustee or officer, unless there has
been a determination that such Trustee or officer did
not engage in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties
involved in the conduct of his office:
(A) by the court or other body approving the
settlement or other disposition; or
(B) based upon a review of readily available
facts (as opposed to a full trial-type
inquiry) by (x) vote of a majority of the
Disinterested Trustees acting on the matter
(provided that a majority of the
Disinterested Trustees then in office act on
the matter) or (y) written opinion of
independent legal counsel.
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(c) The rights of indemnification herein provided may be
insured against by policies maintained by the Trust, shall be
severable, shall not affect any other rights to which any
Trustee or officer may now or hereafter be entitled, shall
continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs,
executors, administrators and assigns of such a person.
Nothing contained herein shall affect any rights to
indemnification to which personnel of the Trust other than
Trustees and officers may be entitled by contract or otherwise
under law.
(d) Expenses of preparation and presentation of a defense to
any claim, action, suit or proceeding of the character
described in paragraph (a) of this Section 4.3 may be advanced
by the Trust prior to final disposition thereof upon receipt
of an undertaking by or on behalf of the recipient to repay
such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided
that either:
(i) such undertaking is secured by a surety bond or
some other appropriate security provided by the
recipient, or the Trust shall be insured against
losses arising out of any such advances; or
(ii) a majority of the Disinterested Trustees acting
on the matter (provided that a majority of the
Disinterested Trustees act on the matter) or an
independent legal counsel in a written opinion shall
determine, based upon a review of readily available
facts (as opposed to a full trial-type inquiry), that
there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Disinterested Trustee" is one
who is not (i) an Interested Person of the Trust (including anyone who
has been exempted from being an Interested Person by any rule,
regulation or order of the Commission), or (ii) involved in the claim,
action, suit or proceeding.
Section 4.4. No Bond Required of Trustees.
-----------------------------------------------
No Trustee shall be obligated to give any bond or other security for
the performance of any of his duties hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust Instruments,
Etc.
-------------------------------------------------------------------
No purchaser, lender, transfer agent or other Person dealing with the
Trustees or any officer, employee or agent of the Trust shall be bound to make
any inquiry concerning the validity of any transaction purporting to be made by
the Trustees or by said officer, employee or agent or be liable for the
application of money or property paid, loaned or delivered to or on the order of
the Trustees or of said officer, employee or agent. Every obligation, contract,
instrument, certificate, Share, other security of the Trust or undertaking, and
every other act or thing
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whatsoever executed in connection with the Trust shall be conclusively presumed
to have been executed or done by the executors thereof only in their capacity as
Trustees under this Declaration or in their capacity as officers, employees or
agents of the Trust. Every written obligation, contract, instrument,
certificate, Share, other security of the Trust or undertaking made or issued by
the Trustees may recite that the same is executed or made by them not
individually, but as Trustees under the Declaration, and that the obligations of
the Trust under any such instrument are not binding upon any of the Trustees or
Shareholders individually, but bind only the trust estate, and may contain any
further recital which they or he may deem appropriate, but the omission of such
recital shall not operate to bind the Trustees individually. The Trustees shall
at all times maintain insurance for the protection of the Trust Property, its
Shareholders, Trustees, officers, employees and agents in such amount as the
Trustees shall deem adequate to cover possible tort liability, and such other
insurance as the Trustees in their sole judgment shall deem advisable.
Section 4.6. Reliance on Experts, Etc.
-------------------------------------------
Each Trustee and officer or employee of the Trust shall, in the
performance of his duties, be fully and completely justified and protected with
regard to any act or any failure to act resulting from reliance in good faith
upon the books of account or other records of the Trust, upon an opinion of
counsel, or upon reports made to the Trust by any of its officers or employees
or by the Investment Adviser, the Distributor, Transfer Agent, selected dealers,
accountants, appraisers or other experts or consultants selected with reasonable
care by the Trustees, officers or employees of the Trust, regardless of whether
such counsel or expert may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
-----------------------------
Section 5.1. Beneficial Interest.
--------------------------------------
The interest of the beneficiaries hereunder shall be divided into
transferable Shares of beneficial interest, all of one class, except as provided
in Section 5.11 and Section 5.13 hereof, par value $.01 per share. The number of
Shares of beneficial interest authorized hereunder is unlimited. All Shares
issued hereunder including, without limitation, Shares issued in connection with
a dividend in Shares or a split of Shares, shall be fully paid and
non-assessable.
Section 5.2. Rights of Shareholders.
-----------------------------------------
The ownership of the Trust Property and the property of each Series of
the Trust of every description and the right to conduct any business
herein-before described are vested exclusively in the Trustees, and the
Shareholders shall have no interest therein other than the beneficial interest
conferred by their Shares, and they shall have no right to call for any
partition or division of any property, profits, rights or interests of the Trust
nor can they be called upon to share or assume any losses of the Trust or suffer
an assessment of any kind by virtue of their ownership of Shares. The Shares
shall be personal property giving only the rights specifically set forth in this
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Declaration. The Shares shall not entitle the holder to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may determine
with respect to any Series of Shares.
Section 5.3. Trust Only.
-----------------------------
It is the intention of the Trustees to create only the relationship of
Trustee and beneficiary between the Trustees and each Shareholder from time to
time. It is not the intention of the Trustees to create a general partnership,
limited partnership, joint stock association, corporation, bailment or any form
of legal relationship other than a trust. Nothing in this Declaration shall be
construed to make the Shareholders, either by themselves or with the Trustees,
partners or members of a joint stock association.
Section 5.4. Issuance of Shares.
-------------------------------------
The Trustees in their discretion may, from time to time without vote of
the Shareholders, issue Shares, in addition to the then issued and outstanding
Shares and Shares held in the treasury, to such party or parties and for such
amount and type of consideration, including cash or property, at such time or
times and on such terms as the Trustees may deem best, and may in such manner
acquire other assets (including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares and Shares
held in the treasury. The Trustees may from time to time divide or combine the
Shares into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Trust. Contributions to the Trust may
be accepted for, and Shares shall be redeemed as, whole Shares and/or 1/1,000ths
of a Share or integral multiples thereof.
Section 5.5. Register of Shares.
-------------------------------------
A register shall be kept at the principal office of the Trust or an
office of the Transfer Agent which shall contain the names and addresses of the
Shareholders and the number of Shares held by them respectively and a record of
all transfers thereof. Such register shall be conclusive as to who are the
holders of the Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of Shareholders. No
Shareholder shall be entitled to receive payment of any dividend or
distribution, nor to have notice given to him as herein or in the By-laws
provided, until he has given his address to the Transfer Agent or such other
officer or agent of the Trustees as shall keep the said register for entry
thereon. It is not contemplated that certificates will be issued for the Shares;
however, the Trustees, in their discretion, may authorize the issuance of share
certificates and promulgate appropriate rules and regulations as to their use.
Section 5.6. Transfer of Shares.
-------------------------------------
Except as otherwise provided by the Trustees, shares shall be
transferable on the records of the Trust only by the record holder thereof or by
his agent thereunto duly authorized, upon
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<PAGE>
delivery to the Trustees or the Transfer Agent of a duly executed instrument of
transfer, together with such evidence of the genuineness of each such execution
and authorization and of other matters as may reasonably be required. Upon such
delivery the transfer shall be recorded on the register of the Trust. Until such
record is made, the Shareholder of record shall be deemed to be the holder of
such Shares for all purposes hereunder and neither the Trustees nor any transfer
agent or registrar nor any officer, employee or agent of the Trust shall be
affected by any notice of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy, or incompetence of any Shareholder, or otherwise by operation of
law, shall be recorded on the register of Shares as the holder of such Shares
upon production of the proper evidence thereof to the Trustees or the Transfer
Agent, but until such record is made, the Shareholder of record shall be deemed
to be the holder of such Shares for all purposes hereunder and neither the
Trustees nor any Transfer Agent or registrar nor any officer or agent of the
Trust shall be affected by any notice of such death, bankruptcy or incompetence,
or other operation of law.
Section 5.7. Notices, Reports.
-----------------------------------
Any and all notices to which any Shareholder may be entitled and any
and all communications shall be deemed duly served or given if mailed, postage
prepaid, addressed to any Shareholder of record at his last known address as
recorded on the register of the Trust. A notice of a meeting, an annual report
and any other communication to Shareholders need not be sent to a Shareholder
(i) if an annual report and a proxy statement for two consecutive shareholder
meetings have been mailed to such Shareholder's address and have been returned
as undeliverable, (ii) if all, and at least two, checks (if sent by first class
mail) in payment of dividends on Shares during a twelve-month period have been
mailed to such Shareholder's address and have been returned as undeliverable or
(iii) in any other case in which a proxy statement concerning a meeting of
security holders is not required to be given pursuant to the Commission's proxy
rules as from time to time in effect under the Securities Exchange Act of 1934.
However, delivery of such proxy statements, annual reports and other
communications shall resume if and when such Shareholder delivers or causes to
be delivered to the Trust written notice setting forth such Shareholder's then
current address.
Section 5.8. Treasury Shares.
----------------------------------
Shares held in the treasury shall, until reissued pursuant to Section
5.4, not confer any voting rights on the Trustees, nor shall such Shares be
entitled to any dividends or other distributions declared with respect to the
Shares.
Section 5.9. Voting Powers.
--------------------------------
The Shareholders shall have power to vote only (i) for the election of
Trustees as provided in Section 2.12; (ii) for the removal of Trustees as
provided in Section 2.13; (iii) with respect to any amendment of this
Declaration to the extent and as provided in Section 8.3; (iv) to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not a court
16
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action, proceeding or claim should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust or any Series or Class
thereof or the Shareholders (provided, however, that a Shareholder of a
particular Series or Class shall not be entitled to bring a derivative or class
action on behalf of any other Series or Class (or Shareholder of any other
Series or Class) of the Trust); and (v) with respect to such additional matters
relating to the Trust as may be required by this Declaration, the By-laws or any
registration of the Trust as an investment company under the 1940 Act with the
Commission (or any successor agency) or as the Trustees may consider necessary
or desirable. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to
bring a proportionate fractional vote, except that the Trustees may, in
conjunction with the establishment of any Series or Class of Shares, establish
or reserve the right to establish conditions under which the several Series or
Classes shall have separate voting rights or no voting rights. There shall be no
cumulative voting in the election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration or the By-laws to be taken by Shareholders.
The By-laws may include further provisions for Shareholders' votes and meetings
and related matters.
Section 5.10. Meetings of Shareholders.
-------------------------------------------
Meetings of Shareholders may be called at any time by the President,
and shall be called by the President and Secretary at the request in writing or
by resolution, of a majority of Trustees, or at the written request of the
holder or holders of ten percent (10%) or more of the total number of Shares
then issued and outstanding of the Trust entitled to vote at such meeting. Any
such request shall state the purpose of the proposed meeting.
Section 5.11. Series Designation.
-------------------------------------
The Trustees, in their discretion, may authorize the division of Shares
into two or more Series, and the different Series shall be established and
designated, and the variations in the relative rights and preferences as between
the different Series shall be fixed and determined, by the Trustees; provided,
that all Shares shall be identical except that there may be variations so fixed
and determined between different Series as to investment objective, purchase
price, allocation of expenses, right of redemption, special and relative rights
as to dividends and on liquidation, conversion rights, and conditions under
which the several Series shall have separate voting rights. All references to
Shares in this Declaration shall be deemed to be Shares of any or all Series as
the context may require.
(a) All provisions herein relating to the Trust shall apply
equally to each Series of the Trust except as the context
requires otherwise.
(b) The number of authorized Shares and the number of Shares
of each Series that may be issued shall be unlimited. The
Trustees may classify or reclassify any unissued Shares or any
Shares previously issued and reacquired of any Series into one
or more Series that may be established and designated from
time to time. The
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Trustees may hold as treasury Shares (of the same or some
other Series), reissue for such consideration and on such
terms as they may determine, or cancel any Shares of any
Series reacquired by the Trust at their discretion from time
to time.
(c) All consideration received by the Trust for the issue or
sale of Shares of a particular Series, together with all
assets in which such consideration is invested or reinvested,
all income, earnings, profits, and proceeds thereof, including
any proceeds derived from the sale, exchange or liquidation of
such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may
be, shall irrevocably belong to that Series for all purposes,
subject only to the rights of creditors of such Series and
except as may otherwise be required by applicable laws, and
shall be so recorded upon the books of account of the Trust.
In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are
not readily identifiable as belonging to any particular
Series, the Trustees shall allocate them among any one or more
of the Series established and designated from time to time in
such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by
the Trustees shall be conclusive and binding upon the
Shareholders of all Series for all purposes.
(d) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that
Series and with all expenses, costs, charges and reserves
attributable to that Series, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are
not readily identifiable as belonging to any particular Series
shall be allocated and charged by the Trustees to and among
any one or more of the Series established and designated from
time to time in such manner and on such basis as the Trustees
in their sole discretion deem fair and equitable. Each
allocation of liabilities, expenses, costs, charges and
reserves by the Trustees shall be conclusive and binding upon
the Shareholders of all Series for all purposes. The Trustees
shall have full discretion, to the extent not inconsistent
with the 1940 Act, to determine which items are capital; and
each such determination and allocation shall be conclusive and
binding upon the Shareholders. The assets of a particular
Series of the Trust shall, under no circumstances, be charged
with liabilities attributable to any other Series of the
Trust. All persons extending credit to, or contracting with or
having any claim against a particular Series of the Trust
shall look only to the assets of that particular Series for
payment of such credit, contract or claim. No Shareholder or
former Shareholder of any Series shall have any claim on or
right to any assets allocated or belonging to any other
Series.
(e) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each
holder of Shares of a Series shall be entitled to receive his
pro rata share of distributions of income and capital gains
made with respect to such Series, except as provided in
Section 5.13 hereof. Upon
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redemption of his Shares or indemnification for liabilities
incurred by reason of his being or having been a Shareholder
of a Series, such Shareholder shall be paid solely out of the
funds and property of such Series of the Trust. Upon
liquidation or termination of a Series of the Trust,
Shareholders of such Series shall be entitled to receive a pro
rata share of the net assets of such Series, except as
provided in Section 5.13 hereof. A Shareholder of a particular
Series of the Trust shall not be entitled to participate in a
derivative or class action on behalf of any other Series or
the Shareholders of any other Series of the Trust.
(f) The establishment and designation of any Series of Shares
shall be effective upon the execution by a majority of the
then Trustees of an instrument setting forth such
establishment and designation and the relative rights and
preferences of such Series, or as otherwise provided in such
instrument. The Trustees may by an instrument executed by a
majority of their number abolish any Series and the
establishment and designation thereof. Except as otherwise
provided in this Article V, the Trustees shall have the power
to determine the designations, preferences, privileges,
limitations and rights, of each class and Series of Shares.
Each instrument referred to in this paragraph shall have the
status of an amendment to this Declaration.
Section 5.12. Assent to Declaration of Trust.
-------------------------------------------------
Every Shareholder, by virtue of having become a shareholder, shall be
held to have expressly assented and agreed to the terms hereof and to have
become a party hereto.
Section 5.13. Class Designation.
------------------------------------
The Trustees, in their discretion, may authorize the division of the
Shares of the Trust, or, if any Series be established, the Shares of any Series,
into two or more Classes, and the different Classes shall be established and
designated, and the variations in the relative rights and preferences as between
the different Classes shall be fixed and determined, by the Trustees; provided,
that all Shares of the Trust or of any Series shall be identical to all other
Shares of the Trust or the same Series, as the case may be, except that there
may be variations between different Classes as to allocation of expenses, right
of redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Classes shall have
separate voting rights. All references to Shares in this Declaration shall be
deemed to be Shares of any or all Classes as the context may require.
If the Trustees shall divide the Shares of the Trust or any Series into two or
more Classes, the following provisions shall be applicable:
(a) All provisions herein relating to the Trust, or any Series
of the Trust, shall apply equally to each Class of Shares of
the Trust or of any Series of the Trust, except as the context
requires otherwise.
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(b) The number of Shares of each Class that may be issued
shall be unlimited. The Trustees may classify or reclassify
any Shares or any Series of any Shares into one or more
Classes that may be established and designated from time to
time. The Trustees may hold as treasury Shares (of the same or
some other Class), reissue for such consideration and on such
terms as they may determine, or cancel any Shares of any Class
reacquired by the Trust at their discretion from time to time.
(c) Liabilities, expenses, costs, charges and reserves related
to the distribution of, and other identified expenses that
should properly be allocated to, the Shares of a particular
Class may be charged to and borne solely by such Class and the
bearing of expenses solely by a Class of Shares may be
appropriately reflected (in a manner determined by the
Trustees) and cause differences in the net asset value
attributable to, and the dividend, redemption and liquidation
rights of, the Shares of different classes. Each allocation of
liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders
of all Classes for all purposes.
(d) The establishment and designation of any Class of Shares
shall be effective upon the execution by a majority of the
then Trustees of an instrument setting forth such
establishment and designation and the relative rights and
preferences of such Class, or as otherwise provided in such
instrument. The Trustees may, by an instrument executed by a
majority of their number, abolish any Class and the
establishment and designation thereof. Each instrument
referred to in this paragraph shall have the status of an
amendment to this Declaration.
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
-----------------------------------
Section 6.1. Redemption of Shares.
---------------------------------------
All Shares of the Trust shall be redeemable, at the redemption price
determined in the manner set out in this Declaration. Redeemed or repurchased
Shares may be resold by the Trust.
The Trust shall redeem the Shares upon the appropriately verified
written application of the record holder thereof (or upon such other form of
request as the Trustees may determine) at such office or agency as may be
designated from time to time for that purpose in the Trust's then effective
registration statement under the Securities Act of 1933. The Trustees may from
time to time specify additional conditions, not inconsistent with the 1940 Act,
regarding the redemption of Shares in the Trust's then effective registration
statement under the Securities Act of 1933.
20
<PAGE>
Section 6.2. Price.
------------------------
Shares shall be redeemed at their net asset value, which may be reduced
by any redemption fee authorized by the Trustees, determined as set forth in
Section 7.1 hereof as of such time as the Trustees shall have theretofore
prescribed by resolution. In the absence of such resolution, the redemption
price of Shares deposited shall be the net asset value of such Shares next
determined as set forth in Section 7.1 hereof after receipt of such application.
Section 6.3. Payment.
--------------------------
Payment for such Shares shall be made in cash or in property out of the
assets of the relevant Series of the Trust to the Shareholder of record at such
time and in the manner, not inconsistent with the 1940 Act or other applicable
laws, as may be specified from time to time in the Trust's then effective
registration statement under the Securities Act of 1933, subject to the
provisions of Section 6.4 hereof.
Section 6.4. Effect of Suspension of Determination of Net Asset Value.
----------------------------------------------------------------------
If, pursuant to Section 6.9 hereof, the Trustees shall declare a
suspension of the determination of net asset value, the rights of Shareholders
(including those who shall have applied for redemption pursuant to Section 6.1
hereof but who shall not yet have received payment) to have Shares redeemed and
paid for by the Trust shall be suspended until the termination of such
suspension is declared. Any record holder who shall have his redemption right so
suspended may, during the period of such suspension, by appropriate written
notice of revocation at the office or agency where application was made, revoke
any application for redemption not honored and withdraw any certificates on
deposit. The redemption price of Shares for which redemption applications have
not been revoked shall be the net asset value of such Shares next determined as
set forth in Section 7.1 after the termination of such suspension, and payment
shall be made within seven (7) days after the date upon which the application
was made plus the period after such application during which the determination
of net asset value was suspended.
Section 6.5. Repurchase by Agreement.
------------------------------------------
The Trust may repurchase Shares directly, or through the Distributor or
another agent designated for the purpose, by agreement with the owner thereof at
a price not exceeding the net asset value per Share determined as of the time
when the purchase or contract of purchase is made or the net asset value as of
any time which may be later determined pursuant to Section 7.1 hereof, provided
payment is not made for the Shares prior to the time as of which such net asset
value is determined.
Section 6.6. Redemption of Shareholder's Interest.
-------------------------------------------------------
The Trust shall have the right at any time without prior notice to the
Shareholder to redeem Shares of any Shareholder for their then current net asset
value per Share if
21
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(a) at such time the Shareholder owns Shares having an
aggregate net asset value of less than an amount set from time
to time by the Trustees subject to such terms and conditions
as the Trustees may approve, and subject to the Trust's giving
general notice to all Shareholders of its intention to avail
itself of such right, either by publication in the Trust's
registration statement, if any, or by such other means as the
Trustees may determine, or
(b) The Trustees believe that it is in the best interest of
the Trust to do so because of prior involvement by the
Shareholder in fraudulent acts relating to securities
transactions.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
------------------------------------------------------------------
Investment Company; Disclosure of Holding.
------------------------------------------
If the Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of Shares or other securities of the Trust has
or may become concentrated in any Person to an extent which would disqualify any
Series of the Trust as a regulated investment company under the Internal Revenue
Code, then the Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a number, or
principal amount, of Shares or other securities of the Trust sufficient to
maintain or bring the direct or indirect ownership of Shares or other securities
of the Trust into conformity with the requirements for such qualification and
(ii) to refuse to transfer or issue Shares or other securities of the Trust to
any Person whose acquisition of the Shares or other securities of the Trust in
question would result in such disqualification. The redemption shall be effected
at the redemption price and in the manner provided in Section 6.1.
The holders of Shares or other securities of the Trust shall upon
demand disclose to the Trustees in writing such information with respect to
direct and indirect ownership of Shares or other securities of the Trust as the
Trustees deem necessary to comply with the provisions of the Internal Revenue
Code, or to comply with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
-----------------------------------------------------------------------
Asset Value Formula.
--------------------
The Trust may also reduce the number of Outstanding Shares pursuant to
the provisions of Section 7.3.
Section 6.9. Suspension of Right of Redemption.
----------------------------------------------------
The Trust may declare a suspension of the right of redemption or
postpone the date of payment or redemption for the whole or any part of any
period (i) during which the New York Stock Exchange is closed other than
customary week-end and holiday closings, (ii) during which trading on the New
York Stock Exchange is restricted, (iii) during which an emergency exists as a
result of which disposal by the Trust of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust fairly
to determine the value of its net assets, or (iv)
22
<PAGE>
during any other period when the Commission may for the protection of
Shareholders of the Trust by order permit suspension of the right of redemption
or postponement of the date of payment or redemption; provided that applicable
rules and regulations of the Commission shall govern as to whether the
conditions prescribed in (ii), (iii), or (iv) exist. Such suspension shall take
effect at such time as the Trust shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment on redemption until
the Trust shall declare the suspension at an end, except that the suspension
shall terminate in any event on the first day on which said stock exchange shall
have reopened or the period specified in (ii) or (iii) shall have expired (as to
which in the absence of an official ruling by the Commission, the determination
of the Trust shall be conclusive). In the case of a suspension of the right of
redemption, a Shareholder may either withdraw his request for redemption or
receive payment based on the net asset value existing after the termination of
the suspension.
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
----------------------------
Section 7.1. Net Asset Value.
----------------------------------
The value of the assets of the Trust or any Series of the Trust shall
be determined by appraisal of the securities of the Trust or allocated to such
Series, such appraisal to be on the basis of such method as shall be deemed to
reflect the fair value thereof, determined in good faith by or under the
direction of the Trustees. From the total value of said assets, there shall be
deducted all indebtedness, interest, taxes, payable or accrued, including
estimated taxes on unrealized book profits, expenses and management charges
accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities attributable to
the Trust or such Series or Class thereof which shall be deemed appropriate. The
net asset value of a Share shall be determined by dividing the net asset value
of the Class, or, if no Class has been established, of the Series, or, if no
Series has been established, of the Trust, by the number of Shares of that
Class, or Series, or of the Trust, as applicable, outstanding. The net asset
value of Shares of the Trust or any Class or Series of the Trust shall be
determined pursuant to the procedure and methods prescribed or approved by the
Trustees in their discretion and as set forth in the most recent Registration
Statement of the Trust as filed with the Securities and Exchange Commission
pursuant to the requirements of the Securities Act of 1933, as amended, the 1940
Act, as amended, and the Rules thereunder. The net asset value of the Shares
shall be determined at least once on each business day, as of the close of
trading on the New York Stock Exchange or as of such other time or times as the
Trustees shall determine. The power and duty to make the daily calculations may
be delegated by the Trustees to the Investment Adviser, the Custodian, the
Transfer Agent or such other Person as the Trustees may determine by resolution
or by approving a contract which delegates such duty to another Person. The
Trustees may suspend the daily determination of net asset value to the extent
permitted by the 1940 Act.
23
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Section 7.2. Distributions to Shareholders.
------------------------------------------------
The Trustees shall from time to time distribute ratably among the
Shareholders of the Trust or a Series such proportion of the net profits,
surplus (including paid-in surplus), capital, or assets of the Trust or such
Series held by the Trustees as they may deem proper. Such distributions may be
made in cash or property (including without limitation any type of obligations
of the Trust or such Series or any assets thereof), and the Trustees may
distribute ratably among the Shareholders additional Shares of the Trust or such
Series issuable hereunder in such manner, at such times, and on such terms as
the Trustees may deem proper. Such distributions may be among the Shareholders
of record at the time of declaring a distribution or among the Shareholders of
record at such other date or time or dates or times as the Trustees shall
determine. The Trustees may in their discretion determine that, solely for the
purposes of such distributions, Outstanding Shares shall exclude Shares for
which orders have been placed subsequent to a specified time on the date the
distribution is declared or on the next preceding day if the distribution is
declared as of a day on which Boston banks are not open for business, all as
described in the registration statement under the Securities Act of 1933. The
Trustees may always retain from the net profits such amount as they may deem
necessary to pay the debts or expenses of the Trust or the Series or to meet
obligations of the Trust or the Series, or as they may deem desirable to use in
the conduct of its affairs or to retain for future requirements or extensions of
the business. The Trustees may adopt and offer to Shareholders such dividend
reinvestment plans, cash dividend payout plans or related plans as the Trustees
shall deem appropriate. The above provisions may be modified to the extent
required by a plan adopted by the Trustees to establish Classes of Shares of the
Trust or of a Series.
Inasmuch as the computation of net income and gains for Federal income
tax purposes may vary from the computation thereof on the books, the above
provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or the Series to avoid or reduce liability for taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
-------------------------------------------------------------------
Reduction of Outstanding Shares.
--------------------------------
Subject to Section 5.11 and Section 5.13 hereof, the net income of the
Trust or any Series shall be determined in such manner as the Trustees shall
provide by resolution. Expenses of the Trust or a Series, including the advisory
or management fee, shall be accrued each day. Such net income may be determined
by or under the direction of the Trustees as of the close of trading on the New
York Stock Exchange on each day on which such Exchange is open or as of such
other time or times as the Trustees shall determine, and, except as provided
herein, all the net income of the Trust or any Series, as so determined, may be
declared as a dividend on the Outstanding Shares of the Trust or such Series.
If, for any reason, the net income of the Trust or any Series, determined at any
time is a negative amount, the Trustees shall have the power with respect to the
Trust or such Series (i) to offset each Shareholder's pro rata share of such
negative amount from the accrued dividend account of such Shareholder, or (ii)
to reduce the number of Outstanding
24
<PAGE>
Shares of the Trust or such Series by reducing the number of Shares in the
account of such Shareholder by that number of full and fractional Shares which
represents the amount of such excess negative net income, or (iii) to cause to
be recorded on the books of the Trust or such Series an asset account in the
amount of such negative net income, which account may be reduced by the amount,
provided that the same shall thereupon become the property of the Trust or such
Series with respect to the Trust or such Series and shall not be paid to any
Shareholder, of dividends declared thereafter upon the Outstanding Shares of the
Trust or such Series on the day such negative net income is experienced, until
such asset account is reduced to zero; or (iv) to combine the methods described
in clauses (i) and (ii) and (iii) of this sentence, in order to cause the net
asset value per Share of the Trust or such Series to remain at a constant amount
per Outstanding Share immediately after each such determination and declaration.
The Trustees shall also have the power to fail to declare a dividend out of net
income for the purpose of causing the net asset value per Share to be increased
to a constant amount. The Trustees shall not be required to adopt, but may at
any time adopt, discontinue or amend the practice of maintaining the net asset
value per Share of the Trust or a Series at a constant amount.
Section 7.4. Allocation Between Principal and Income.
----------------------------------------------------------
The Trustees shall have full discretion to determine whether any cash
or property received shall be treated as income or as principal and whether any
item of expense shall be charged to the income or the principal amount, and
their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much if any of the value thereof shall be treated as income, the balance, if
any, to be treated as principal.
Section 7.5. Power to Modify Foregoing Procedures.
-------------------------------------------------------
Notwithstanding any of the foregoing provisions of this Article VII,
the Trustees may prescribe, in their absolute discretion, such other bases and
times for determining the per Share net asset value or net income, or the
declaration and payment of dividends and distributions as they may deem
necessary or desirable.
ARTICLE VIII
DURATION; TERMINATION OF TRUST;
AMENDMENT; MERGERS, ETC.
------------------------
Section 8.1. Duration.
---------------------------
The Trust shall continue without limitation of time but subject to the
provisions of this Article VIII.
25
<PAGE>
Section 8.2. Termination of Trust.
---------------------------------------
(a) The Trust or any Series of the Trust may be terminated by
an instrument in writing signed by a majority of the Trustees,
or by the affirmative vote of the holders of a majority of the
Shares of the Trust or Series outstanding and entitled to vote
at any meeting of Shareholders. Upon the termination of the
Trust or any Series,
(i) the Trust or any Series shall carry on no
business except for the purpose of winding up its
affairs;
(ii) the Trustees shall proceed to wind up the
affairs of the Trust or Series and all of the powers
of the Trustees under this Declaration shall continue
until the affairs of the Trust or Series shall have
been wound up, including the power to fulfill or
discharge the contracts of the Trust or Series,
collect its assets, sell, convey, assign, exchange,
transfer or otherwise dispose of all or any part of
the remaining Trust Property or property of the
Series to one or more persons at public or private
sale for consideration which may consist in whole or
in part of cash, securities or other property of any
kind, discharge or pay its liabilities, and do all
other acts appropriate to liquidate its business; and
(iii) after paying or adequately providing for the
payment of all liabilities, and upon receipt of such
releases, indemnities and refunding agreements as
they deem necessary for their protection, the
Trustees may distribute the remaining Trust Property
or property of the Series, in cash or in kind or
partly each, among the Shareholders of the Trust or
Series according to their respective rights.
(b) After termination of the Trust or any Series and
distribution to the Shareholders as herein provided, a
majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth
the fact of such termination, and the Trustees shall thereupon
be discharged from all further liabilities and duties
hereunder, and the rights and interests of all Shareholders of
the Trust or Series shall thereupon cease.
Section 8.3. Amendment Procedure.
--------------------------------------
(a) This Declaration may be amended by a vote of the holders
of a majority of the Shares outstanding and entitled to vote.
Amendments shall be effective upon the taking of action as
provided in this section or at such later time as shall be
specified in the applicable vote or instrument. The Trustees
may also amend this Declaration without the vote or consent of
Shareholders if they deem it necessary to conform this
Declaration to the requirements of applicable federal or state
laws or regulations or the requirements of the regulated
investment company provisions
26
<PAGE>
of the Internal Revenue Code (including those provisions of
such Code relating to the retention of the exemption from
federal income tax with respect to dividends paid by the Trust
out of interest income received on Municipal Bonds), but the
Trustees shall not be liable for failing so to do. The
Trustees may also amend this Declaration without the vote or
consent of Shareholders if they deem it necessary or desirable
to change the name of the Trust, to supply any omission, to
cure, correct or supplement any ambiguous, defective or
inconsistent provision hereof, or to make any other changes in
the Declaration which do not materially adversely affect the
rights of Shareholders hereunder.
(b) No amendment may be made under this Section 8.3 which
would change any rights with respect to any Shares of the
Trust or Series by reducing the amount payable thereon upon
liquidation of the Trust or Series or by diminishing or
eliminating any voting rights pertaining thereto, except with
the vote or consent of the holders of two-thirds of the Shares
of the Trust or Series outstanding and entitled to vote.
Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from
personal liability of the Shareholders, Trustees, officers,
employees and agents of the Trust or to permit assessments
upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting
forth an amendment and reciting that it was duly adopted by
the Shareholders or by the Trustees as aforesaid or a copy of
the Declaration, as amended, and executed by a majority of the
Trustees, shall be conclusive evidence of such amendment when
lodged among the records of the Trust.
Notwithstanding any other provision hereof, until such time as a
Registration Statement under the Securities Act of 1933, as amended, covering
the first public offering of securities of the Trust shall have become
effective, this Declaration may be terminated or amended in any respect by the
affirmative vote of a majority of the Trustees or by an instrument signed by a
majority of the Trustees.
Section 8.4. Merger, Consolidation and Sale of Assets.
-----------------------------------------------------------
The Trust or any Series thereof may merge or consolidate with any other
corporation, association, trust or other organization or may sell, lease or
exchange all or substantially all of the Trust Property or the property of any
Series, including its good will, upon such terms and conditions and for such
consideration when and as authorized by an instrument in writing signed by a
majority of the Trustees.
Section 8.5. Incorporation.
--------------------------------
When authorized by an instrument in writing signed by a majority of the
Trustees, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association or other organization to
27
<PAGE>
take over all of the Trust Property or the property of any Series or to carry on
any business in which the Trust or the Series shall directly or indirectly have
any interest, and to sell, convey and transfer the Trust Property or the
property of any Series to any such corporation, trust, association or
organization in exchange for the Shares or securities thereof or otherwise, and
to lend money to, subscribe for the Shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization, or any corporation, partnership, trust, association or
organization in which the Trust or the Series holds or is about to acquire
shares or any other interest. The Trustees may also cause a merger or
consolidation between the Trust or any Series or any successor thereto and any
such corporation, trust, partnership, association or other organization if and
to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organization or entities.
ARTICLE IX
REPORTS TO SHAREHOLDERS
-----------------------
The Trustees shall at least semi-annually submit to the Shareholders a
written financial report, which may be included in the Trust's prospectus or
statement of additional information, of the transactions of the Trust, including
financial statements which shall at least annually be certified by independent
public accountants.
ARTICLE X
MISCELLANEOUS
-------------
Section 10.1. Filing.
-------------------------
This Declaration and any amendment hereto shall be filed in the office
of the Secretary of the Commonwealth of Massachusetts and in such other places
as may be required under the laws of the Commonwealth of Massachusetts and may
also be filed or recorded in such other places as the Trustees deem appropriate.
Unless the amendment is embodied in an instrument signed by a majority of the
Trustees, each amendment filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and operative,
may be executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may hereafter be referred to in
lieu of the original Declaration and the various amendments thereto. The
restated Declaration may include any amendment which the Trustees are empowered
to adopt, whether or not such amendment has been adopted prior to the execution
of the restated Declaration.
28
<PAGE>
Section 10.2. Governing Law.
--------------------------------
This Declaration is executed by the Trustees and delivered in the
Commonwealth of Massachusetts and with reference to the internal laws thereof,
and the rights of all parties and the validity and construction of every
provision hereof shall be subject to and construed according to the internal
laws of said State without regard to the choice of law rules thereof.
Section 10.3. Counterparts.
-------------------------------
This Declaration may be simultaneously executed in several
counterparts, each of which shall be deemed to be an original, and such
counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 10.4. Reliance by Third Parties.
--------------------------------------------
Any certificate executed by an individual who, according to the records
of the Trust appears to be a Trustee hereunder, certifying to: (a) the number or
identity of Trustees or Shareholders, (b) the due authorization of the execution
of any instrument or writing, (c) the form of any vote passed at a meeting of
Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees and their successors.
Section 10.5. Provisions in Conflict with Law or Regulations.
-----------------------------------------------------------------
The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provision shall be deemed never to have constituted a part of this
Declaration; provided, however, that such determination shall not affect any of
the remaining provisions of this Declaration or render invalid or improper any
action taken or omitted prior to such determination.
29
<PAGE>
If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provisions in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
14th day of October, 1998.
/s/Caroline Pearson
------------------------------------
Caroline Pearson, as sole Trustee and not Individually
Two International Place, 10th floor
Boston, Massachusetts 02110
WHEREAS, the Trust has a principal place of business at Two
International Place, Boston, Massachusetts 02110; and
30
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
County of Suffolk October 14, 1998
Then personally appeared the above-named Caroline Pearson who
acknowledged the foregoing instrument to be her free act and deed.
Before me,
/s/Maureen E. Kane
------------------------------
Notary Public
My commission expires: 3/4/05
31
Exhibit (b)
BY-LAWS
OF
KEMPER FUNDS TRUST
ARTICLE I
DEFINITIONS
The terms "Commission", "Custodian", "Declaration", "Distributor",
"Investment Adviser", "Municipal Bonds", "1940 Act", "Shareholder", "Shares",
"Transfer Agent", "Trust", "Trust Property", "Trustees", and "vote of a majority
of the Shares outstanding and entitled to vote", have the respective meanings
given them in the Declaration of Trust of Kemper Funds Trust dated October 14,
1998, as amended from time to time.
ARTICLE II
OFFICES
Section 1. Principal Office. Until changed by the Trustees, the
principal office of the Trust in The Commonwealth of Massachusetts shall be in
the City of Boston, County of Suffolk.
Section 2. Other Offices. The Trust may have offices in such other
places without as well as within The Commonwealth as the Trustees from time to
time may determine.
<PAGE>
ARTICLE III
SHAREHOLDERS
Section 1. Meetings. Meetings of the Shareholders shall be held as
provided in the Declaration at such place within or without The Commonwealth of
Massachusetts as the Trustees shall designate. The holders of one-third of the
outstanding Shares present in person or by proxy shall constitute a quorum at
any meeting of the Shareholders.
Section 2. Notice of Meetings. Notice of all meetings of the
Shareholders, stating the time, place and purposes of the meeting, shall be
given by the Trustees by mail to each Shareholder at his/her address as recorded
on the register of the Trust mailed at least ten (10) days and not more than
ninety (90) days before the meeting. Only the business stated in the notice of
the meeting shall be considered at such meeting. Any adjourned meeting may be
held as adjourned without further notice. No notice need be given to any
Shareholder who should have failed to inform the Trust of his/her current
address, if notice is not required by the Declaration, or if a written waiver of
notice, executed before or after the meeting by the Shareholder or his/her
attorney thereunto authorized, is filed with the records of the meeting.
Section 3. Record Date for Meetings and Other Purposes. For the purpose
of determining the Shareholders who are entitled to notice of and to vote at any
meeting, or to participate in any distribution, or for the purpose of any other
action, the Trustees may from time to time close the transfer books for such
period, not exceeding thirty (30) days, as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date not more than
ninety (90) days prior to the date of any meeting of Shareholders or
distribution or other action as a record date for the determinations of the
persons to be treated as Shareholders of record for such purposes, except for
dividend payments which shall be governed by the Declaration.
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Section 4. Proxies. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy shall
be voted at any meeting unless it shall have been placed on file with the
Secretary, or with such other officer or agent of the Trust as the Secretary may
direct, for verification prior to the time at which such vote shall be taken.
Proxies may be solicited in the name of one or more Trustees or one or more of
the officers of the Trust. Only Shareholders of record shall be entitled to
vote. Each whole share shall be entitled to one vote as to any matter on which
it is entitled by the Declaration to vote, and each fractional Share shall be
entitled to a proportionate fractional vote. When any Share is held jointly by
several persons, any one of them may vote at any meeting in person or by proxy
in respect of such Share, but if more than one of them shall be present at such
meeting in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Share. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. If the holder
of any such share is a minor or a person of unsound mind, and subject to
guardianship or the legal control of any other person as regards the charge or
management of such Share, he/she may vote by his/her guardian or such other
person appointed or having such control, and such vote may be given in person or
by proxy.
Section 5. Action Without Meeting. Any action which may be taken by
Shareholders may be taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such larger proportion thereof as shall be
required by law, the Declaration or these By-Laws for approval of such matter)
consent to the action in writing and the written consents are filed with the
records of the meetings of Shareholders. Such consents shall be treated for all
purposes as a vote taken at a meeting of Shareholders.
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ARTICLE IV
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees may in their
discretion provide for regular or stated meetings of the Trustees. Notice of
regular or stated meetings need not be given. Meetings of the Trustees other
than regular or stated meetings shall be held whenever called by the
Chairperson, or by any one of the Trustees, at the time being in office. Notice
of the time and place of each meeting other than regular or stated meetings
shall be given by the Secretary or an Assistant Secretary or by the officer or
Trustee calling the meeting and shall be mailed to each Trustee at least two
days before the meeting, or shall be telegraphed, cabled, sent by facsimile or
electronic mail, or other communication leaving a visual record to each Trustee
at his/her business address, or personally delivered to him/her at least one day
before the meeting. Such notice may, however, be waived by any Trustee. Notice
of a meeting need not be given to any Trustee if a written waiver of notice,
executed by him/her before or after the meeting, is filed with the records of
the meeting, or to any Trustee who attends the meeting without protesting prior
thereto or at its commencement the lack of notice to him/her. A notice or waiver
of notice need not specify the purpose of any meeting. Meetings can be held in
conjunction with investment companies having the same investment adviser or an
affiliated investment adviser. The Trustees may meet by means of a telephone
conference circuit or similar communications equipment by means of which all
persons participating in the meeting shall be deemed to have been present at a
place designated by the Trustees at the meeting. Any action required or
permitted to be taken at any meeting of the Trustees may be taken by the
Trustees without a meeting if all the Trustees consent to the action in writing
and the written consents are filed with the records of the Trustees' meetings.
Such consents shall be treated as a vote for all purposes.
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Section 2. Quorum and Manner of Acting. A majority of the Trustees
shall be present in person at any regular or special meeting of the Trustees in
order to constitute a quorum for the transaction of business at such meeting and
(except as otherwise required by law, the Declaration or these By-Laws) the act
of a majority of the Trustees present at any such meeting, at which a quorum is
present, shall be the act of the Trustees. In the absence of a quorum, a
majority of the Trustees present may adjourn the meeting from time to time until
a quorum shall be present. Notice of an adjourned meeting need not be given.
ARTICLE IV.A
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HONORARY TRUSTEES
Section 1. Number; Qualification; Term: The Trustees may from time to
time designate and appoint one or more qualified persons to the position of
"honorary trustee." Each honorary trustee shall serve for such term as shall be
specified in the resolution of the Trustees appointing him or her until his or
her earlier resignation or removal. An honorary trustee may be removed from such
position with or without cause by the vote of a majority of the Trustees given
at any regular meeting or special meeting of the Board.
Section 2. Duties; Remuneration. An honorary trustee shall be invited
to attend all meetings of the Trustees but shall not be present at any portion
of a meeting from which the honorary trustee shall have been excluded by vote of
the Trustees. An honorary trustee shall not be a "Trustee" or "officer" within
the meaning of the Trust's Declaration of Trust or of these By-Laws, shall not
be deemed to be a member of an "advisory board" within the meaning of the
Investment Company Act of 1940, as amended from time to time, shall not hold
himself or herself out as any of the foregoing, and shall not be liable to any
person for any act of the Trust. Notice of special meetings may be given to an
honorary trustee but the failure to give such notice shall
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not affect the validity of any meeting or the action taken thereat. An honorary
trustee shall not have the powers of a Trustee, may not vote at meetings of the
Trustees and shall not take part in the operation or governance of the Trust. An
honorary trustee shall not receive any compensation but may, in the discretion
of the Trustees, be reimbursed for expenses incurred in attending meetings of
the Trustees or otherwise.
ARTICLE V
COMMITTEES
Section 1. Executive and Other Committees. The Trustees by vote of a
majority of all the Trustees may elect from their own number an Executive
Committee to consist of not less than three (3) to hold office at the pleasure
of the Trustees, which shall have the power to conduct the current and ordinary
business of the Trust while the Trustees are not in session, including the
purchase and sale of securities and the designation of securities to be
delivered upon redemption of Shares of the Trust, and such other powers of the
Trustees as the Trustees may, from time to time, delegate to them except those
powers which by law, the Declaration or these By-Laws they are prohibited from
delegating. The Trustees may also elect from their own number other Committees
from time to time, the number composing such Committees, the powers conferred
upon the same (subject to the same limitations as with respect to the Executive
Committee) and the term of membership on such Committees to be determined by the
Trustees. The Trustees may designate a Chairperson of any such Committee. In the
absence of such designation, the Committee may elect its own Chairperson.
Section 2. Meetings, Quorum and Manner of Acting. The Trustees may (1)
provide for stated meetings of any Committee, (2) specify the manner of calling
and notice required for special meetings of any Committee, (3) specify the
number of members of a Committee required
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to constitute a quorum and the number of members of a Committee required to
exercise specified powers delegated to such Committee, and (4) authorize the
making of decisions to exercise specified powers by written assent of the
requisite number of members of a Committee without a meeting. Unless otherwise
specified by the Trustees, the members of a Committee may meet by means of a
telephone conference circuit.
The Executive Committee shall keep regular minutes of its meetings and
records of decisions taken without a meeting and cause them to be recorded in a
book designated for that purpose and kept in the Office of the Trust.
ARTICLE VI
OFFICERS
Section 1. General Provisions. The officers of the Trust shall be a
President, a Treasurer and a Secretary, who shall be elected by the Trustees.
The Trustees may elect or appoint such other officers or agents as the business
of the Trust may require, including one or more Executive Vice Presidents, one
or more Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. The Trustees may delegate to any officer or Committee the
power to appoint any subordinate officers or agents. The Trustees by vote of a
majority of all the Trustees may elect, but shall not be required to elect, from
their own number a Chairperson and Vice-Chairperson of the Trustees.
Section 2. Term of Office and Qualifications. Except as otherwise
provided by law, the Declaration or these By-Laws, the President, the Treasurer
and the Secretary shall each hold office until his/her successor shall have been
duly elected and qualified, and all other officers shall hold office at the
pleasure of the Trustees. The Secretary and Treasurer may be the same person. An
Executive Vice President or Vice President and the Treasurer or Assistant
Treasurer or an
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Executive Vice President or a Vice President and the Secretary or Assistant
Secretary may be the same person, but the offices of Executive Vice President or
Vice President and Secretary and Treasurer shall not be held by the same person.
The President shall hold no other office. Except as above provided, any two
offices may be held by the same person. Any officer may be, but none need be, a
Trustee or Shareholder.
Section 3. Removal. The Trustees, at any regular or special meeting of
the Trustees, may remove any officer without cause, by a vote of a majority of
the Trustees then in office. Any officer or agent appointed by an officer or
Committee may be removed with or without cause by such appointing officer or
Committee.
Section 4. Chairperson of the Board. The Chairperson of the Board, if
there be such an officer, shall be the senior officer of the Trust, preside at
all shareholders' meetings and at all meetings of the Board of Trustees, and
shall be ex officio a member of all committees of the Board of Trustees. The
Chairperson of the Board shall also call meetings of the Trustees and of any
committee thereof when he/she deems it necessary. He/She shall have such other
powers and perform such other duties as may be assigned to him/her from time to
time by the Board of Trustees.
Section 5. Vice-Chairperson of the Board. The Vice-Chairperson of the
Board, if there be such an officer, shall, in the absence of the Chairperson,
preside at all shareholders' meetings and at all meetings of the Board of
Trustees and shall have such powers and perform such other duties as may be
assigned to him/her from time to time by the Board of Trustees.
Section 6. Powers and Duties of the President. The President, in the
absence of the Chairperson and Vice Chairperson, if any, may call meetings of
the Trustees and of any Committee thereof when he/she deems it necessary and, in
the absence of the Chairperson and Vice-Chairperson, if any, may preside at all
meetings of the Shareholders and at all meetings of
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the Trustees. Subject to the control of the Trustees and to the control of any
Committees of the Trustees, within their respective spheres, as provided by the
Trustees, he/she shall at all times exercise a general supervision and direction
over the affairs of the Trust. He/She shall have the power to employ attorneys
and counsel for the Trust and to employ such subordinate officers, agents,
clerks and employees as he/she may find necessary to transact the business of
the Trust. He/She shall also have the power to grant, issue, execute or sign
such powers of attorney, proxies or other documents as may be deemed advisable
or necessary in furtherance of the interests of the Trust. The President shall
have such other powers and duties, as from time to time may be conferred upon or
assigned to him/her by the Trustees.
Section 7. Powers and Duties of Executive Vice Presidents and Vice
Presidents. In the absence or disability of the President, the Executive Vice
President or, if there be more than one Executive Vice President, any Executive
Vice President designated by the Trustees shall perform all the duties and may
exercise any of the powers of the President, subject to the control of the
Trustees. In the event no Executive Vice President is able so to serve, the Vice
President or, if there be more than one Vice President, any Vice President
designated by the Trustees shall perform all the duties and may exercise any of
the powers of the President, subject to the control of the Trustees. Each
Executive Vice President and Vice President shall perform such duties as may be
assigned to him/her from time to time by the Trustees and the President.
Section 8. Powers and Duties of the Treasurer. The Treasurer shall be
the principal financial and accounting officer of the Trust. He/She shall
deliver all funds of the Trust which may come into his/her hands to such
Custodian as the Trustees may employ pursuant to Article X of these By-Laws.
He/She shall render a statement of condition of the finances of the Trust to the
Trustees as often as they shall require the same and he/she shall in general
perform all the duties incident to the office of Treasurer and such other duties
as from time to time may be assigned to
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him/her by the Trustees. The Treasurer shall give a bond for the faithful
discharge of his/her duties, if required so to do by the Trustees, in such sum
and with such surety or sureties as the Trustees shall require.
Section 9. Powers and Duties of the Secretary. The Secretary shall keep
the minutes of all meetings of the Trustees and of the Shareholders in proper
books provided for that purpose; he/she shall have custody of the seal of the
Trust; he/she shall have charge of the Share transfer books, lists and records
unless the same are in the charge of the Transfer Agent. He/She shall attend to
the giving and serving of all notices by the Trust in accordance with the
provisions of these By-Laws and as required by law; and subject to these
By-Laws, he/she shall in general perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him/her
by the Trustees.
Section 10. Powers and Duties of Assistant Treasurers. In the absence
or disability of the Treasurer, any Assistant Treasurer designated by the
Trustees shall perform all the duties, and may exercise any of the powers, of
the Treasurer. Each Assistant Treasurer shall perform such other duties as from
time to time may be assigned to him/her by the Trustees. Each Assistant
Treasurer shall give a bond for the faithful discharge of his/her duties, if
required so to do by the Trustees, in such sum and with such surety or sureties
as the Trustees shall require.
Section 11. Powers and Duties of Assistant Secretaries. In the absence
or disability of the Secretary, any Assistant Secretary designated by the
Trustees shall perform all the duties, and may exercise any of the powers, of
the Secretary. Each Assistant Secretary shall perform such other duties as from
time to time may be assigned to him/her by the Trustees.
Section 12. Compensation of Officers and Trustees and Members of the
Advisory Board. Subject to any applicable provisions of the Declaration, the
compensation of the officers and Trustees and members of any Advisory Board
shall be fixed from time to time by the Trustees or,
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in the case of officers, by any Committee or officer upon whom such power may be
conferred by the Trustees. No officer shall be prevented from receiving such
compensation as such officer by reason of the fact that he/she is also a
Trustee.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Trust shall be as specified from time to time by
the Trustees.
ARTICLE VIII
SEAL
The Trustees may adopt a seal which shall be in such form and shall
have such inscription thereon as the Trustees may from time to time prescribe.
ARTICLE IX
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given by law, the
Declaration or these By-Laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been telegraphed, cabled or sent by facsimile or other communication leaving a
visual record for the purposes of these By-Laws when it has been delivered to a
representative of any telegraph, cable or facsimile or other such communications
company with instructions that it be telegraphed, cabled, sent by facsimile or
electronic mail or other communication leaving a visual record.
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ARTICLE X
CUSTODY OF SECURITIES
Section 1. Employment of a Custodian. The Trust shall place and at all
times maintain in the custody of a Custodian (including any sub-custodian for
the Custodian) all funds, securities and similar investments included in the
Trust Property. The Custodian (and any sub-custodian) shall be a bank meeting
the requirements of a custodian of assets of a registered management investment
company prescribed in the 1940 Act and the rules and orders thereunder, and
shall be appointed from time to time by the Trustees, who shall fix its
remuneration.
Section 2. Action Upon Termination of Custodian Agreement. Upon
termination of a Custodian Agreement or inability of the Custodian to continue
to serve, the Trustees shall promptly appoint a successor custodian, but in the
event that no successor custodian can be found who has the required
qualifications and is willing to serve, the Trustees shall call as promptly as
possible a special meeting of the Shareholders to determine whether the Trust
shall function without a custodian or shall be liquidated.
Section 3. Central Certificate System. Subject to such rules,
regulations and orders as the Commission may adopt, the Trustees may direct the
Custodian or a sub-custodian to deposit all or any part of the securities owned
by the Trust in a system for the central handling of securities established by a
national securities exchange or a national securities association registered
with Commission under the Securities Exchange Act of 1934, or such other person
as may be permitted by the Commission, or otherwise in accordance with the 1940
Act and the rules and orders thereunder, pursuant to which system all securities
of any particular class or series of any issuer deposited within the system are
treated as fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of such securities, provided that all such deposits
shall be subject to withdrawal only upon the order of the Trust or its
Custodian.
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Section 4. Acceptance of Receipts in Lieu of Certificates. Subject to
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the Custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE XI
AMENDMENTS
These By-Laws, or any of them, may be altered, amended or repealed, or
new By-Laws may be adopted by (a) vote of a majority of the Shares outstanding
and entitled to vote or (b) the Trustees, provided, however, that no By-Law may
be amended, adopted or repealed by the Trustees if such amendment, adoption or
repeal requires, pursuant to law, the Declaration or these By-Laws, a vote of
the Shareholders.
ARTICLE XII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what
extent, and at what time and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to the
inspection of the Shareholders; and no Shareholder shall have any right of
inspecting any account or book or document of the Trust except as conferred by
laws or authorized by the Trustees or by resolution of the Shareholders.
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Exhibit (c)
KEMPER FUNDS TRUST
Establishment and Designation of Series
of Beneficial Interest, $.01 Par Value
The undersigned, being the initial Trustee of Kemper Funds Trust, a
Massachusetts business trust (the "Trust"), acting pursuant to Section 5.11 of
the Declaration of Trust of the Trust dated October 14, 1998 (the "Declaration
of Trust"), hereby establishes the three initial series of the Trust consisting
of an unlimited number of shares of beneficial interest, $.01 par value per
share, of the Trust (each individually a "Fund" or collectively the "Funds"),
each Fund to have the following designation and special and relative rights:
1. The Funds shall be designated as follows:
Kemper Large Company Growth Fund
Kemper Research Fund
Kemper Small Cap Value+Growth Fund
2. Each Fund shall be authorized to hold cash and invest in securities
and instruments and use investment techniques as described in the Trust's
registration statement under the Securities Act of 1933, as amended from time to
time. Each share of beneficial interest, $.01 par value per share, of each Fund
("share") shall be redeemable as provided in the Declaration of Trust, shall be
entitled to one vote (or fraction thereof with respect to a fractional share) on
matters on which shares of that Fund shall be entitled to vote and shall
represent a pro rata beneficial interest in the assets allocated to that Fund.
The proceeds of sales of shares of a Fund, together with any income and gain
thereon, less any diminution or expenses thereof, shall irrevocably belong to
that Fund, unless otherwise required by law. Each share of a Fund shall be
entitled to receive its pro rata share of net assets of that Fund upon
liquidation of that Fund. Upon redemption of a shareholder's shares or
indemnification for liabilities incurred by reason of a shareholder's being or
having been a shareholder of a Fund, or the entry of a final judgment in favor
of a shareholder by reason of being or having been a shareholder of a Fund, such
shareholder shall be paid solely out of the property of the Fund.
3. Shareholders of the Trust shall vote together on any matter, except
to the extent otherwise required by the Investment Company Act of 1940, as
amended (the "1940 Act"), or when the Trustees have determined that the matter
affects only the interest of Shareholders of one or more series, in which case
only the Shareholders of such series shall be entitled to vote thereon. Any
matter shall be deemed to have been effectively acted upon with respect to a
Fund if acted upon as provided in Rule 18f-2 under the 1940 Act or any successor
rule and in the Declaration of Trust. The Trustees of the Trust may, in
conjunction with the establishment of any additional series or class of shares
of the Trust, establish or reserve the right to establish conditions under which
the several series or classes shall have separate voting rights or no voting
rights.
4. The shares of beneficial interest, $.01 par value per share, of the
Trust outstanding on the date hereof shall be deemed to be shares of Kemper
Large Company Growth Fund, Kemper Research Fund and Kemper Small Cap
Value+Growth Fund.
<PAGE>
5. The assets and liabilities of the Trust existing on the date hereof
shall, except as provided below, be allocated to Kemper Large Company Growth
Fund, Kemper Research Fund and Kemper Small Cap Value+Growth Fund and,
hereafter, the assets and liabilities of the Trust shall be allocated among the
Funds, now or hereafter created, as set forth in Section 5.11 of the Declaration
of Trust, except as provided below.
(a) Costs incurred by the Trust on behalf of the Fund in connection
with the organization, registration and public offering of shares
of Kemper Large Company Growth Fund, Kemper Research Fund and
Kemper Small Cap Value+Growth Fund shall be allocated to each such
Fund and shall be amortized by each such Fund over the five-year
period beginning with the month such Fund commences operations,
unless otherwise required by applicable law or generally accepted
accounting principles.
(b) The liabilities, expenses, costs, charges or reserves of the
Trust which are not readily identifiable as belonging to any
particular Fund shall be allocated among the Funds and any Series
hereafter established on the basis of its relative average daily
net assets.
(c) The Trustees may from time to time in particular cases make
specific allocations of assets or liabilities to a Fund.
6. The Trustees (including any successor Trustees) shall have the right
at any time and from time to time to reallocate assets and expenses or to change
the designation of the Fund (or any class thereof) now or hereafter created, or
to otherwise change the special and relative rights of the Fund (or any class
thereof) provided that such change shall not adversely affect the rights of
Shareholders of the Funds.
The foregoing shall be effective upon execution.
/s/Caroline Pearson
- -------------------------------------
Caroline Pearson, as sole Trustee
Dated: October 14, 1998
2
Exhibit (d)(1)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Funds Trust
Two International Place
Boston, Massachusetts 02110
December 28, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Large Company Growth Fund
Ladies and Gentlemen:
Kemper Funds Trust (the "Trust") has been established as a Massachusetts
business Trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest, par value $0.01 per share, (the "Shares") in separate
series, or funds. The Board of Trustees has authorized Kemper Large Company
Growth 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 dated October 14, 1998, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of
this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest dated October 14, 1998 relating to the Fund.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended (the "Code"), relating to regulated
investment companies and all rules and regulations
<PAGE>
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.
2
<PAGE>
Nothing in this Agreement shall be deemed to shift to you or to diminish the
obligations of any agent of the Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications 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 1/12 of 0.70 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 $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of 0.67 of
1 percent of such portion; provided further that, for any calendar month during
which the average of such values exceeds $1,000,000,000 the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of 0.65 of 1 percent of such portion; provided
that, for any calendar month during which the average of such values exceeds
$2,500,000,000 the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12
3
<PAGE>
of 0.63 of 1 percent of such portion over the lowest applicable expense fully
described below or 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 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 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, 2000, 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
4
<PAGE>
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 "Kemper Funds
Trust" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner 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.
5
<PAGE>
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,
Kemper Funds Trust, on behalf of
Kemper Large Company Growth Fund,
By: /s/Mark S. Casady
-----------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/Cornelia M. Small
--------------------
Managing Director
6
Exhibit (d)(2)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Funds Trust
Two International Place
Boston, Massachusetts 02110
December 28, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Research Fund
Ladies and Gentlemen:
Kemper Funds Trust (the "Trust") has been established as a Massachusetts
business Trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest, par value $0.01 per share, (the "Shares") in separate
series, or funds. The Board of Trustees has authorized Kemper Research 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 dated October 14, 1998, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of
this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest dated October 14, 1998 relating to the Fund.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended (the "Code"), relating to regulated
investment companies and all rules and regulations
<PAGE>
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.
2
<PAGE>
Nothing in this Agreement shall be deemed to shift to you or to diminish the
obligations of any agent of the Fund or any other person not a party to this
Agreement which is obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications 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 1/12 of 0.70 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 $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of 0.67 of
1 percent of such portion; provided further that, for any calendar month during
which the average of such values exceeds $1,000,000,000 the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of 0.65 of 1 percent of such portion; provided
that, for any calendar month during which the average of such values exceeds
$2,500,000,000 the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12
3
<PAGE>
of 0.63 of 1 percent of such portion over the lowest applicable expense fully
described below or 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 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 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, 2000, 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
4
<PAGE>
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 "Kemper Funds
Trust" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner 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.
5
<PAGE>
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,
Kemper Funds Trust, on behalf of
Kemper Research Fund,
By: /s/Mark S. Casady
-----------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/Cornelia M. Small
--------------------
Managing Director
6
Exhibit (d)(3)
INVESTMENT MANAGEMENT AGREEMENT
Kemper Funds Trust
Two International Place
Boston, Massachusetts 02110
December 28, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Kemper Small Cap Value+Growth Fund
Ladies and Gentlemen:
Kemper Funds Trust (the "Trust") has been established as a Massachusetts
business Trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest, par value $0.01 per share, (the "Shares") in separate
series, or funds. The Board of Trustees has authorized Kemper Small Cap
Value+Growth 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 dated October 14, 1998, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the
Fund selecting you as investment manager and approving the form of
this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest dated October 14, 1998 relating to the Fund.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended (the "Code"), relating to regulated
investment companies and all rules and regulations
<PAGE>
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
2
<PAGE>
control of the Trust's Board of Trustees. Nothing in this Agreement shall be
deemed to shift to you or to diminish the obligations of any agent of the Fund
or any other person not a party to this Agreement which is obligated to provide
services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications 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 1/12 of 0.75 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 $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of 0.72 of
1 percent of such portion; provided further that, for any calendar month during
which the average of such values exceeds $1,000,000,000 the fee payable for that
month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of 0.70 of 1 percent of such portion; provided
that, for any calendar month during which the average of such values exceeds
$2,500,000,000 the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12
3
<PAGE>
of 0.68 of 1 percent of such portion over the lowest applicable expense fully
described below or 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 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 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, 2000, 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
4
<PAGE>
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 "Kemper Funds
Trust" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of the Fund, or
Trustee, officer, employee or agent of the Trust, shall be subject to claims
against or obligations of the Trust or of the Fund to any extent whatsoever, but
that the Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner 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.
5
<PAGE>
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,
Kemper Funds Trust, on behalf of
Kemper Small Cap Value+Growth Fund,
By: /s/Mark S. Casady
-----------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/Cornelia M. Small
--------------------
Managing Director
6
Exhibit (e)(1)
UNDERWRITING AND DISTRIBUTION SERVICES AGREEMENT
AGREEMENT made this 28th day of December, 1998 between KEMPER FUNDS TRUST, a
Massachusetts business trust (the "Fund"), and KEMPER DISTRIBUTORS, INC., a
Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as agent for distribution of
shares of beneficial interest (hereinafter called "shares") of the Fund in
jurisdictions wherein shares of the Fund may legally be offered for sale;
provided, however, that the Fund in its absolute discretion may (a) issue or
sell shares directly to holders of shares of the Fund upon such terms and
conditions and for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase rights, the payment
or reinvestment of dividends or distributions, or otherwise; or (b) issue or
sell shares at net asset value to the shareholders of any other investment
company, for which KDI shall act as exclusive distributor, who wish to exchange
all or a portion of their investment in shares of such other investment company
for shares of the Fund. KDI shall appoint various financial service firms
("Firms") to provide distribution services to investors. The Firms shall provide
such office space and equipment, telephone facilities, personnel, literature
distribution, advertising and promotion as is necessary or beneficial for
providing information and distribution services to existing and potential
clients of the Firms. KDI may also provide some of the above services for the
Fund.
KDI accepts such appointment as distributor and principal underwriter
and agrees to render such services and to assume the obligations herein set
forth for the compensation herein provided. KDI shall for all purposes herein
provided be deemed to be an independent contractor and, unless expressly
provided herein or otherwise authorized, shall have no authority to act for or
represent the Fund in any way. KDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. The services of KDI to the Fund under
this Agreement are not to be deemed exclusive, and KDI shall be free to render
similar services or other services to others so long as its services hereunder
are not impaired thereby.
In carrying out its duties and responsibilities hereunder, KDI will,
pursuant to separate written contracts, appoint various Firms to provide
advertising, promotion and other distribution services contemplated hereunder
directly to or for the benefit of existing and potential shareholders who may be
clients of such Firms. Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund.
KDI shall use its best efforts with reasonable promptness to sell such
part of the authorized shares of the Fund remaining unissued as from time to
time shall be effectively registered under the Securities Act of 1933
("Securities Act"), at prices determined as hereinafter provided and on terms
hereinafter set forth, all subject to applicable federal and state laws and
regulations and to the Fund's organizational documents.
<PAGE>
2. KDI shall sell shares of the Fund to or through qualified Firms in
such manner, not inconsistent with the provisions hereof and the then effective
registration statement (and related prospectus) of the Fund under the Securities
Act, as KDI may determine from time to time, provided that no Firm or other
person shall be appointed or authorized to act as agent of the Fund without
prior consent of the Fund. In addition to sales made by it as agent of the Fund,
KDI may, in its discretion, also sell shares of the Fund as principal to persons
with whom it does not have selling group agreements.
Shares of any class of any series of the Fund offered for sale or sold
by KDI shall be so offered or sold at a price per share determined in accordance
with the then current prospectus. The price the Fund shall receive for all
shares purchased from it shall be the net asset value used in determining the
public offering price applicable to the sale of such shares. Any excess of the
sales price over the net asset value of the shares of the Fund sold by KDI as
agent shall be retained by KDI as a commission for its services hereunder. KDI
may compensate Firms for sales of shares at the commission levels provided in
the Fund's prospectus from time to time. KDI may pay other commissions, fees or
concessions to Firms, any may pay them to others in its discretion, in such
amounts as KDI shall determine from time to time. KDI shall be entitled to
receive and retain any applicable contingent deferred sales charge as described
in the Fund's prospectus. KDI shall also receive any distribution services fee
payable by the Fund as provided in the Fund's Amended and Restated 12b-1 Plan,
as amended from time to time (the "Plan").
KDI will require each Firm to conform to the provisions hereof and the
Registration Statement (and related prospectus) at the time in effect under the
Securities Act with respect to the public offering price or net asset value, as
applicable, of the Fund's shares, and neither KDI nor any such Firms shall
withhold the placing of purchase orders so as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively registered
under the Securities Act for sale as herein contemplated such shares as KDI
shall reasonably request and as the Securities and Exchange Commission shall
permit to be so registered. Notwithstanding any other provision hereof, the Fund
may terminate, suspend or withdraw the offering of shares whenever, in its sole
discretion, it deems such action to be desirable.
4. The Fund will execute any and all documents and furnish any and all
information that may be reasonably necessary in connection with the
qualification of its shares for sale (including the qualification of the Fund as
a dealer where necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required without its
consent to comply with any requirement which in its opinion is unduly
burdensome). The Fund will furnish to KDI from time to time such information
with respect to the Fund and its shares as KDI may reasonably request for use in
connection with the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various Firms to
issue and deliver on behalf of the Fund such confirmations of sales made by it
pursuant to this Agreement as may be required. At or prior to the time of
issuance of shares, KDI will pay or cause to be paid to the Fund the amount due
the Fund for the sale of such shares. Certificates shall be issued or shares
<PAGE>
registered on the transfer books of the Fund in such names and denominations as
KDI may specify.
6. KDI shall order shares of the Fund from the Fund only to the extent
that it shall have received purchase orders therefor. KDI will not make, or
authorize Firms or others to make (a) any short sales of shares of the Fund; or
(b) any sales of such shares to any Board member or officer of the Fund or to
any officer or Board member of KDI or of any corporation or association
furnishing investment advisory, managerial or supervisory services to the Fund,
or to any corporation or association, unless such sales are made in accordance
with the then current prospectus relating to the sale of such shares. KDI, as
agent of and for the account of the Fund, may repurchase the shares of the Fund
at such prices and upon such terms and conditions as shall be specified in the
current prospectus of the Fund. In selling or reacquiring shares of the Fund for
the account of the Fund, KDI will in all respects conform to the requirements of
all state and federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or reacquisition,
as the case may be, and will indemnify and save harmless the Fund from any
damage or expense on account of any wrongful act by KDI or any employee,
representative or agent of KDI. KDI will observe and be bound by all the
provisions of the Fund's organizational documents (and of any fundamental
policies adopted by the Fund pursuant to the Investment Company Act of 1940 (the
"Investment Company Act"), notice of which shall have been given to KDI) which
at the time in any way require, limit, restrict, prohibit or otherwise regulate
any action on the part of KDI hereunder.
7. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided by KDI under
this Agreement or the Plan. The Fund will pay or cause to be paid expenses
(including the fees and disbursements of its own counsel) of any registration of
the Fund and its shares under the United States securities laws and expenses
incident to the issuance of shares of beneficial interest, such as the cost of
share certificates, issue taxes, and fees of the transfer agent. KDI will pay
all expenses (other than expenses which one or more Firms may bear pursuant to
any agreement with KDI) incident to the sale and distribution of the shares
issued or sold hereunder, including, without limiting the generality of the
foregoing, all (a) expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other literature,
advertising and selling aids in connection with the offering of the shares for
sale (except that such expenses need not include expenses incurred by the Fund
in connection with the preparation, typesetting, printing and distribution of
any registration statement or prospectus, report or other communication to
shareholders in their capacity as such), (b) expenses of advertising in
connection with such offering and (c) expenses (other than the Fund's auditing
expenses) of qualifying or continuing the qualification of the shares for sale
and, in connection therewith, of qualifying or continuing the qualification of
the Fund as a dealer or broker under the laws of such states as may be
designated by KDI under the conditions herein specified. No transfer taxes, if
any, which may be payable in connection with the issue or delivery or shares
sold as herein contemplated or of the certificates for such shares shall be
borne by the Fund, and KDI will indemnify and hold harmless the Fund against
liability for all such transfer taxes.
<PAGE>
8. This Agreement shall become effective on the date hereof and shall
continue until September 30, 2000; and shall continue from year to year
thereafter only so long as such continuance is approved in the manner required
by the Investment Company Act.
This Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any penalty
by the Fund or by KDI on sixty (60) days' written notice to the other party. The
Fund may effect termination with respect to any class of any series of the Fund
by a vote of (i) a majority of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement, or in any other agreement related to the
Plan, or (ii) a majority of the outstanding voting securities of such series or
class. Without prejudice to any other remedies of the Fund, the Fund may
terminate this Agreement at any time immediately upon KDI's failure to fulfill
any of its obligations hereunder.
All material amendments to this Agreement must be approved by a vote of
a majority of the Board, and of the Board members who are not interested persons
of the Fund and who have no direct or indirect financial interest in the
operation of the Plan, this Agreement or in any other agreement related to the
Plan, cast in person at a meeting called for such purpose.
The terms "assignment," "interested person" and "vote of a majority of
the outstanding voting securities" shall have the meanings set forth in the
Investment Company Act and the rules and regulations thereunder.
KDI shall receive such compensation for its distribution services as
set forth in the Plan. Termination of this Agreement shall not affect the right
of KDI to receive payments on any unpaid balance of the compensation earned
prior to such termination, as set forth in the Plan.
9. KDI will not use or distribute, or authorize the use, distribution
or dissemination by Firms or others in connection with the sale of Fund shares
any statements other than those contained in the Fund's current prospectus,
except such supplemental literature or advertising as shall be lawful under
federal and state securities laws and regulations. KDI will furnish the Fund
with copies of all such material.
10. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and
delivered or mailed, postage prepaid, to the other party at such address as such
other party may designate for the receipt of such notice.
12. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust, and all amendments thereto, all of which are
on file with the Secretary of The Commonwealth of Massachusetts, and the
limitation of shareholder and trustee liability contained therein. This
Agreement has been executed by and on behalf of the Fund by its representatives
as such representatives and not individually, and the obligations of the Fund
<PAGE>
hereunder are not binding upon any of the Trustees, officers or
shareholders of the Fund individually but are binding upon only the assets and
property of the Fund. With respect to any claim by KDI for recovery of any
liability of the Fund arising hereunder allocated to a particular series or
class, whether in accordance with the express terms hereof or otherwise, KDI
shall have recourse solely against the assets of that series or class to satisfy
such claim and shall have no recourse against the assets of any other series or
class for such purpose.
13. This Agreement shall be construed in accordance with applicable
federal law and with the laws of The Commonwealth of Massachusetts.
14. This Agreement is the entire contract between the parties relating
to the subject matter hereof and supersedes all prior agreements between the
parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be
executed as of the day and year first above written.
KEMPER FUNDS TRUST ATTEST:
By: /s/Mark S. Casady /s/Maureen Kane
---------------------------- ------------------------------
Mark S. Casady Title: Asst. Sec.
President
KEMPER DISTRIBUTORS, INC. ATTEST:
By: /s/James L. Greenawalt /s/Philip J. Collora
---------------------------- ------------------------------
James L. Greenawalt Title: Assist. Sec.
President
Exhibit (g)(1)
DRAFT OF DECEMBER 29, 1998 FOR PURPOSES OF EDGAR FILING ONLY
CUSTODIAN CONTRACT
between
KEMPER FUNDS TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C> <C> <C>
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
</TABLE>
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between Kemper Funds Trust, a business trust organized
and existing under the laws of The Commonwealth of Massachusetts and having its
principal place of business at Two International Place, Boston, Massachusetts
02110 (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 three series,
Kemper Large Company Growth Fund, Kemper Research Fund, and Kemper Small Cap
Value+Growth 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 have no more
<PAGE>
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
3
<PAGE>
exchange, or of any similar organization or organizations,
regarding 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
4
<PAGE>
Portfolio, other than cash maintained by the Portfolio in a bank
account 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
5
<PAGE>
agent for this purpose) registered in the name of the
Portfolio or in 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
6
<PAGE>
domestic securities for the account of a Portfolio is made by the
Custodian in advance of 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
7
<PAGE>
Portfolio copies of daily transaction sheets reflecting each
day's transactions in the U.S. Securities System for the
account of the Portfolio;
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;
8
<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
9
<PAGE>
indication of the manner in which such proxies are to be voted, and
shall 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
10
<PAGE>
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.
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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<PAGE>
(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.
12
<PAGE>
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.
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
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<PAGE>
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.
7. Evidence of Authority
---------------------
14
<PAGE>
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.
10. Opinion of Fund's Independent Accountants
-----------------------------------------
15
<PAGE>
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 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
16
<PAGE>
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) 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
17
<PAGE>
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 parties
18
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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 Kemper Large Company Growth Fund, Kemper Research Fund, and Kemper
Small Cap Value+Growth 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.
19
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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.
20
<PAGE>
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 [_________], 1999.
ATTEST KEMPER FUNDS TRUST
By:
- --------------------------------- ---------------------------------
Name: Name:
Title:
ATTEST STATE STREET BANK AND TRUST COMPANY
By:
- --------------------------------- ---------------------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Executive Vice President
21
Exhibit (h)(1)
AGENCY AGREEMENT
AGREEMENT dated the 28th day of December, 1998, by and between KEMPER FUNDS
TRUST, a Massachusetts business trust ("Fund"), and KEMPER SERVICE COMPANY, a
Delaware corporation ("Service Company").
WHEREAS, Fund wants to appoint Service Company as Transfer Agent and Dividend
Disbursing Agent, and Service Company wants to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the
parties hereto agree as follows:
1. Documents to be Filed with Appointment. In connection with the appointment of
Service Company as Transfer Agent and Dividend Disbursing Agent for Fund, there
will be filed with Service Company the following documents:
A. A certified copy of the resolutions of the Board of Trustees
of Fund appointing Service Company as Transfer Agent and
Dividend Disbursing Agent, approving the form of this
Agreement, and designating certain persons to give written
instructions and requests on behalf of Fund.
B. A certified copy of the Agreement and Declaration of Trust of
Fund and any amendments thereto.
C. A certified copy of the Bylaws of Fund.
D. Copies of Registration Statements filed with the Securities
and Exchange Commission.
E. Specimens of all forms of outstanding share certificates as
approved by the Board of Trustees of Fund, with a certificate
of the Secretary of Fund as to such approval.
F. Specimens of the signatures of the officers of the Fund
authorized to sign share certificates and individuals
authorized to sign written instructions and requests on behalf
of the Fund.
G. An opinion of counsel for Fund:
(1) With respect to Fund's organization and existence
under the laws of The Commonwealth of Massachusetts.
(2) With respect to the status of all shares of Fund
covered by this appointment under the Securities Act
of 1933, and any other applicable federal or state
statute.
(3) To the effect that all issued shares are, and all
unissued shares will be when issued, validly issued,
fully paid and non-assessable.
<PAGE>
2. Certain Representations and Warranties of Service Company. Service Company
represents and warrants to Fund that:
A. It is a corporation duly organized and existing and in good
standing under the laws of the State of Delaware.
B. It is duly qualified to carry on its business in the State of
Missouri.
C. It is empowered under applicable laws and by its Certificate
of Incorporation and Bylaws to enter into and perform the
services contemplated in this Agreement.
D. All requisite corporate action has been taken to authorize it
to enter into and perform this Agreement.
E. It has and will continue to have and maintain the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
F. It is, and will continue to be, registered as a transfer agent
under the Securities Exchange Act of 1934.
3. Certain Representations and Warranties of Fund. Fund represents and warrants
to Service Company that:
A. It is a business trust duly organized and existing and in good
standing under the laws of The Commonwealth of Massachusetts.
B. It is an investment company registered under the Investment
Company Act of 1940.
C. A registration statement under the Securities Act of 1933 has
been filed and will be effective with respect to all shares of
Fund being offered for sale at any time and from time to time.
D. All requisite steps have been or will be taken to register
Fund's shares for sale in all applicable states, including the
District of Columbia.
E. Fund and its Trustees are empowered under applicable laws and
by the Fund's Agreement and Declaration of Trust and Bylaws to
enter into and perform this Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement, Fund hereby
employs and appoints Service Company as Transfer Agent and Dividend Disbursing
Agent effective the date hereof.
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<PAGE>
B. Service Company hereby accepts such employment and appointment and
agrees that it will act as Fund's Transfer Agent and Dividend Disbursing Agent.
Service Company agrees that it will also act as agent in connection with Fund's
periodic withdrawal payment accounts and other open-account or similar plans for
shareholders, if any.
C. Service Company agrees to provide the necessary facilities,
equipment and personnel to perform its duties and obligations hereunder in
accordance with industry practice.
D. Fund agrees to use all reasonable efforts to deliver to Service
Company in Kansas City, Missouri, as soon as they are available, all its
shareholder account records.
E. Subject to the provisions of Sections 20 and 21 hereof, Service
Company agrees that it will perform all the usual and ordinary services of
Transfer Agent and Dividend Disbursing Agent and as agent for the various
shareholder accounts, including, without limitation, the following: issuing,
transferring and canceling share certificates, maintaining all shareholder
accounts, preparing shareholder meeting lists, mailing proxies, receiving and
tabulating proxies, mailing shareholder reports and prospectuses, withholding
federal income taxes, preparing and mailing checks for disbursement of income
and capital gains dividends, preparing and filing all required U.S. Treasury
Department information returns for all shareholders, preparing and mailing
confirmation forms to shareholders and dealers with respect to all purchases and
liquidations of Fund shares and other transactions in shareholder accounts for
which confirmations are required, recording reinvestments of dividends and
distributions in Fund shares, recording redemptions of Fund shares and preparing
and mailing checks for payments upon redemption and for disbursements to
systematic withdrawal plan shareholders.
5. Compensation and Expenses.
A. In consideration for the services provided hereunder by Service
Company as Transfer Agent and Dividend Disbursing Agent, Fund will pay to
Service Company from time to time compensation as agreed upon for all services
rendered as Agent, and also, all its reasonable out-of-pocket expenses and other
disbursements incurred in connection with the agency. Such compensation will be
set forth in a separate schedule to be agreed to by Fund and Service Company.
The initial agreement regarding compensation is attached as Exhibit A.
B. Fund agrees to promptly reimburse Service Company for all reasonable
out-of-pocket expenses or advances incurred by Service Company in connection
with the performance of services under this Agreement including, but not limited
to, postage (and first class mail insurance in connection with mailing share
certificates), envelopes, check forms, continuous forms, forms for reports and
statements, stationery, and other similar items, telephone and telegraph charges
incurred in answering inquiries from dealers or shareholders, microfilm used
each year to record the previous year's transactions in shareholder accounts and
computer tapes used for permanent storage of records and cost of insertion of
materials in mailing envelopes by outside firms. Service Company may, at its
option, arrange to have various service providers submit invoices directly to
the Fund for payment of out-of-pocket expenses reimbursable hereunder.
3
<PAGE>
6. Efficient Operation of Service Company System. In connection with the
performance of its services under this Agreement, Service Company is responsible
for the accurate and efficient functioning of its system at all times,
including:
(1) The accuracy of the entries in Service Company's records
reflecting purchase and redemption orders and other
instructions received by Service Company from dealers,
shareholders, Fund or its principal underwriter.
(2) The timely availability and the accuracy of shareholder lists,
shareholder account verifications, confirmations and other
shareholder account information to be produced from Service
Company's records or data.
(3) The accurate and timely issuance of dividend and distribution
checks in accordance with instructions received from Fund.
(4) The accuracy of redemption transactions and payments in
accordance with redemption instructions received from dealers,
shareholders or Fund or other authorized persons.
(5) The deposit daily in Fund's appropriate special bank account
of all checks and payments received from dealers or
shareholders for investment in shares.
(6) The requiring of proper forms of instructions, signatures and
signature guarantees and any necessary documents supporting
the rightfulness of transfers, redemptions and other
shareholder account transactions, all in conformance with
Service Company's present procedures with such changes as may
be deemed reasonably appropriate by Service Company or as may
be reasonably approved by or on behalf of Fund.
(7) The maintenance of a current duplicate set of Fund's essential
or required records, as agreed upon from time to time by Fund
and Service Company, at a secure distant location, in form
available and usable forthwith in the event of any breakdown
or disaster disrupting its main operation.
7. Indemnification.
A. Fund shall indemnify and hold Service Company harmless from and
against any and all claims, actions, suits, losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or attributable
to any action or omission by Service Company pursuant to this Agreement or in
connection with the agency relationship created by this Agreement, provided that
Service Company has acted in good faith, without negligence and without willful
misconduct.
B. Service Company shall indemnify and hold Fund harmless from and
against any and all claims, actions, suits, losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or attributable
to any action or omission by Service Company pursuant to this Agreement or in
connection with the agency relationship created by this Agreement, provided
4
<PAGE>
that Service Company has not acted in good faith, without negligence and without
willful misconduct.
C. In order that the indemnification provisions contained in this
Section 7 shall apply, upon the assertion of a claim for which either party (the
"Indemnifying Party") may be required to provide indemnification hereunder, the
party seeking indemnification (the "Indemnitee") shall promptly notify the
Indemnifying Party of such assertion, and shall keep such party advised with
respect to all developments concerning such claim. The Indemnifying Party shall
be entitled to assume control of the defense and the negotiations, if any,
regarding settlement of the claim. If the Indemnifying Party assumes control,
the Indemnitee shall have the option to participate in the defense and
negotiations of such claim at its own expense. The Indemnitee shall in no event
confess, admit to, compromise, or settle any claim for which the Indemnifying
Party may be required to indemnify it except with the prior written consent of
the Indemnifying Party, which shall not be unreasonably withheld.
8. Certain Covenants of Service Company and Fund.
A. All requisite steps will be taken by Fund from time to time when and
as necessary to register the Fund's shares for sale in all states in which
Fund's shares shall at the time be offered for sale and require registration. If
at any time Fund receives notice of any stop order or other proceeding in any
such state affecting such registration or the sale of Fund's shares, or of any
stop order or other proceeding under the Federal securities laws affecting the
sale of Fund's shares, Fund will give prompt notice thereof to Service Company.
B. Service Company hereby agrees to establish and maintain facilities
and procedures reasonably acceptable to Fund for safekeeping of share
certificates, check forms, and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices. Further, Service Company agrees to carry insurance, as
specified in Exhibit B hereto, with insurers reasonably acceptable to Fund and
in minimum amounts that are reasonably acceptable to Fund, which will not be
changed without the consent of Fund, which consent shall not be unreasonably
withheld, and which will be expanded in coverage or increased in amounts from
time to time if and when reasonably requested by Fund. If Service Company
determines that it is unable to obtain any such insurance upon commercially
reasonable terms, it shall promptly so advise Fund in writing. In such event,
Fund shall have the right to terminate this Agreement upon 30 days notice.
C. To the extent required by Section 31 of the Investment Company Act
of 1940 and Rules thereunder, Service Company agrees that all records maintained
by Service Company relating to the services to be performed by Service Company
under this Agreement are the property of Fund and will be preserved and will be
surrendered promptly to Fund on request.
D. Service Company agrees to furnish Fund semi-annual reports of its
financial condition, consisting of a balance sheet, earnings statement and any
other reasonably available financial information reasonably requested by Fund.
The annual financial statements will be certified by Service Company's certified
public accountants.
5
<PAGE>
E. Service Company represents and agrees that it will use all
reasonable efforts to keep current on the trends of the investment company
industry relating to shareholder services and will use all reasonable efforts to
continue to modernize and improve its system without additional cost to Fund.
F. Service Company will permit Fund and its authorized representatives
to make periodic inspections of its operations at reasonable times during
business hours.
G. If Service Company is prevented from complying, either totally or in
part, with any of the terms or provisions of this Agreement, by reason of fire,
flood, storm, strike, lockout or other labor trouble, riot, war, rebellion,
accidents, acts of God, equipment, utility or transmission failure or damage,
and/or any other cause or casualty beyond the reasonable control of Service
Company, whether similar to the foregoing matters or not, then upon written
notice to Fund, the requirements of this Agreement that are affected by such
disability, to the extent so affected, shall be suspended during the period of
such disability; provided, however, that Service Company shall make reasonable
effort to remove such disability as soon as possible. During such period, Fund
may seek alternate sources of service without liability hereunder; and Service
Company will use all reasonable efforts to assist Fund to obtain alternate
sources of service. Service Company shall have no liability to Fund for
nonperformance because of the reasons set forth in this Section 8.G; but if a
disability that, in Fund's reasonable belief, materially affects Service
Company's ability to perform its obligations under this Agreement continues for
a period of 30 days, then Fund shall have the right to terminate this Agreement
upon 10 days written notice to Service Company.
9. Adjustment. In case of any recapitalization, readjustment or other change in
the structure of Fund requiring a change in the form of share certificates,
Service Company will issue or register certificates in the new form in exchange
for, or in transfer of, the outstanding certificates in the old form, upon
receiving the following:
A. Written instructions from an officer of Fund.
B. Certified copy of any amendment to the Agreement and
Declaration of Trust or other document effecting the change.
C. Certified copy of any order or consent of each governmental or
regulatory authority required by law for the issuance of the
shares in the new form, and an opinion of counsel that no
order or consent of any other government or regulatory
authority is required.
D. Specimens of the new certificates in the form approved by the
Board of Trustees of Fund, with a certificate of the Secretary
of Fund as to such approval.
E. Opinion of counsel for Fund:
(1) With respect to the status of the shares of Fund in
the new form under the
6
<PAGE>
Securities Act of 1933, and any other applicable
federal or state laws.
(2) To the effect that the issued shares in the new form
are, and all unissued shares will be when issued,
validly issued, fully paid and non-assessable.
10. Share Certificates. Fund will furnish Service Company with a sufficient
supply of blank share certificates and from time to time will renew such supply
upon the request of Service Company. Such certificates will be signed manually
or by facsimile signatures of the officers of Fund authorized by law and Fund's
Bylaws to sign share certificates and, if required, will bear the trust seal or
facsimile thereof.
11. Death, Resignation or Removal of Signing Officer. Fund will file promptly
with Service Company written notice of any change in the officers authorized to
sign share certificates, written instructions or requests, together with two
signature cards bearing the specimen signature of each newly authorized officer,
all as certified by an appropriate officer of the Fund. In case any officer of
Fund who will have signed manually or whose facsimile signature will have been
affixed to blank share certificates will die, resign, or be removed prior to the
issuance of such certificates, Service Company may issue or register such share
certificates as the share certificates of Fund notwithstanding such death,
resignation, or removal, until specifically directed to the contrary by Fund in
writing. In the absence of such direction, Fund will file promptly with Service
Company such approval, adoption, or ratification as may be required by law.
12. Future Amendments of Agreement and Declaration of Trust and Bylaws. Fund
will promptly file with Service Company copies of all material amendments to its
Agreement and Declaration of Trust and Bylaws and Registration Statement made
after the date of this Agreement.
13. Instructions, Opinion of Counsel and Signatures. At any time Service Company
may apply to any officer of Fund for instructions, and may consult with legal
counsel for Fund at the expense of Fund, or with its own legal counsel at its
own expense, with respect to any matter arising in connection with the agency;
and it will not be liable for any action taken or omitted by it in good faith in
reliance upon such instructions or upon the opinion of such counsel. Service
Company is authorized to act on the orders, directions or instructions of such
persons as the Board of Trustees of Fund shall from time to time designate by
resolution. Service Company will be protected in acting upon any paper or
document, including any orders, directions or instructions, reasonably believed
by it to be genuine and to have been signed by the proper person or persons; and
Service Company will not be held to have notice of any change of authority of
any person so authorized by Fund until receipt of written notice thereof from
Fund. Service Company will also be protected in recognizing share certificates
that it reasonably believes to bear the proper manual or facsimile signatures of
the officers of Fund, and the proper countersignature of any former Transfer
Agent or Registrar, or of a Co-Transfer Agent or Co-Registrar.
14. Papers Subject to Approval of Counsel. The acceptance by Service Company of
its appointment as Transfer Agent and Dividend Disbursing Agent, and all
documents filed in connection with such appointment and thereafter in connection
with the agencies, will be subject
7
<PAGE>
to the approval of legal counsel for Service Company, which approval will not be
unreasonably withheld.
15. Certification of Documents. The required copy of the Agreement and
Declaration of Trust of Fund and copies of all amendments thereto will be
certified by the appropriate official of The Commonwealth of Massachusetts; and
if such Agreement and Declaration of Trust and amendments are required by law to
be also filed with a county, city or other officer or official body, a
certificate of such filing will appear on the certified copy submitted to
Service Company. A copy of the order or consent of each governmental or
regulatory authority required by law for the issuance of Fund shares will be
certified by the Secretary or Clerk of such governmental or regulatory
authority, under proper seal of such authority. The copy of the Bylaws and
copies of all amendments thereto and copies of resolutions of the Board of
Trustees of Fund will be certified by the Secretary or an Assistant Secretary of
Fund.
16. Records. Service Company will maintain customary records in connection with
its agency, and particularly will maintain those records required to be
maintained pursuant to sub-paragraph (2)(iv) of paragraph (b) of Rule 31a-1
under the Investment Company Act of 1940, if any.
17. Disposition of Books, Records and Cancelled Certificates. Service Company
will send periodically to Fund, or to where designated by the Secretary or an
Assistant Secretary of Fund, all books, documents, and all records no longer
deemed needed for current purposes and share certificates which have been
cancelled in transfer or in exchange, upon the understanding that such books,
documents, records, and share certificates will not be destroyed by Fund without
the consent of Service Company (which consent will not be unreasonably
withheld), but will be safely stored for possible future reference.
18. Provisions Relating to Service Company as Transfer Agent.
A. Service Company will make original issues of share certificates upon
written request of an officer of Fund and upon being furnished with a certified
copy of a resolution of the Board of Trustees authorizing such original issue,
an opinion of counsel as outlined in Section 1.G or 9.E of this Agreement, the
certificates required by Section 10 of this Agreement and any other documents
required by Section 1 or 9 of this Agreement.
B. Before making any original issue of certificates, Fund will furnish
Service Company with sufficient funds to pay any taxes required on the original
issue of the shares. Fund will furnish Service Company such evidence as may be
required by Service Company to show the actual value of the shares. If no taxes
are payable, Service Company will upon request be furnished with an opinion of
outside counsel to that effect.
C. Shares will be transferred and new certificates issued in transfer,
or shares accepted for redemption and funds remitted therefor, upon surrender of
the old certificates in form deemed by Service Company properly endorsed for
transfer or redemption accompanied by such documents as Service Company may deem
necessary to evidence the authority of the person making the
8
<PAGE>
transfer or redemption, and bearing satisfactory evidence of the payment of any
applicable share transfer taxes. Service Company reserves the right to refuse to
transfer or redeem shares until it is satisfied that the endorsement or
signature on the certificate or any other document is valid and genuine, and for
that purpose it may require a guarantee of signature by such persons as may from
time to time be specified in the prospectus related to such shares or otherwise
authorized by Fund. Service Company also reserves the right to refuse to
transfer or redeem shares until it is satisfied that the requested transfer or
redemption is legally authorized, and it will incur no liability for the refusal
in good faith to make transfers or redemptions which, in its judgment, are
improper, unauthorized, or otherwise not rightful. Service Company may, in
effecting transfers or redemptions, rely upon Simplification Acts or other
statutes which protect it and Fund in not requiring complete fiduciary
documentation.
D. When mail is used for delivery of share certificates, Service
Company will forward share certificates in "nonnegotiable" form as provided by
Fund by first class mail, all such mail deliveries to be covered while in
transit to the addressee by insurance arranged for by Service Company.
E. Service Company will issue and mail subscription warrants and
certificates provided by Fund and representing share dividends, exchanges or
split-ups, or act as Conversion Agent upon receiving written instructions from
any officer of Fund and such other documents as Service Company deems necessary.
F. Service Company will issue, transfer, and split-up certificates upon
receiving written instructions from an officer of Fund and such other documents
as Service Company may deem necessary.
G. Service Company may issue new certificates in place of certificates
represented to have been lost, destroyed, stolen or otherwise wrongfully taken,
upon receiving indemnity satisfactory to Service Company, and may issue new
certificates in exchange for, and upon surrender of, mutilated certificates. Any
such issuance shall be in accordance with the provisions of law governing such
matter and any procedures adopted by the Board of Trustees of the Fund of which
Service Company has notice.
H. Service Company will supply a shareholder's list to Fund properly
certified by an officer of Service Company for any shareholder meeting upon
receiving a request from an officer of Fund. It will also supply lists at such
other times as may be reasonably requested by an officer of Fund.
I. Upon receipt of written instructions of an officer of Fund, Service
Company will address and mail notices to shareholders.
J. In case of any request or demand for the inspection of the share
books of Fund or any other books of Fund in the possession of Service Company,
Service Company will endeavor to notify Fund and to secure instructions as to
permitting or refusing such inspection. Service Company reserves the right,
however, to exhibit the share books or other books to any person in
9
<PAGE>
case it is advised by its counsel that it may be held responsible for the
failure to exhibit the share books or other books to such person.
19. Provisions Relating to Dividend Disbursing Agency.
A. Service Company will, at the expense of Fund, provide a special form
of check containing the imprint of any device or other matter desired by Fund.
Said checks must, however, be of a form and size convenient for use by Service
Company.
B. If Fund wants to include additional printed matter, financial
statements, etc., with the dividend checks, the same will be furnished to
Service Company within a reasonable time prior to the date of mailing of the
dividend checks, at the expense of Fund.
C. If Fund wants its distributions mailed in any special form of
envelopes, sufficient supply of the same will be furnished to Service Company
but the size and form of said envelopes will be subject to the approval of
Service Company. If stamped envelopes are used, they must be furnished by Fund;
or, if postage stamps are to be affixed to the envelopes, the stamps or the cash
necessary for such stamps must be furnished by Fund.
D. Service Company will maintain one or more deposit accounts as Agent
for Fund, into which the funds for payment of dividends, distributions,
redemptions or other disbursements provided for hereunder will be deposited, and
against which checks will be drawn.
20. Termination of Agreement.
A. This Agreement may be terminated by either party upon sixty (60)
days prior written notice to the other party.
B. Fund, in addition to any other rights and remedies, shall have the
right to terminate this Agreement forthwith upon the occurrence at any time of
any of the following events:
(1) Any interruption or cessation of operations by Service Company
or its assigns which materially interferes with the business
operation of Fund.
(2) The bankruptcy of Service Company or its assigns or the
appointment of a receiver for Service Company or its assigns.
(3) Any merger, consolidation or sale of substantially all the
assets of Service Company or its assigns.
(4) The acquisition of a controlling interest in Service Company
or its assigns, by any broker, dealer, investment adviser or
investment company except as may presently exist.
(5) Failure by Service Company or its assigns to perform its
duties in accordance with
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this Agreement, which failure materially adversely affects the
business operations of Fund and which failure continues for
thirty (30) days after written notice from Fund.
(6) The registration of Service Company or its assigns as a
transfer agent under the Securities Exchange Act of 1934 is
revoked, terminated or suspended for any reason.
C. In the event of termination, Fund will promptly pay Service Company
all amounts due to Service Company hereunder. Upon termination of this
Agreement, Service Company shall deliver all shareholder and account records
pertaining to Fund either to Fund or as directed in writing by Fund.
21. Assignment.
A. Neither this Agreement nor any rights or obligations hereunder may
be assigned by Service Company without the written consent of Fund; provided,
however, no assignment will relieve Service Company of any of its obligations
hereunder.
B. This Agreement including, without limitation, the provisions of
Section 7 will inure to the benefit of and be binding upon the parties and their
respective successors and assigns.
C. Service Company is authorized by Fund to use the system services of
DST Systems, Inc. and the system and other services, including data entry, of
Administrative Management Group, Inc.
22. Confidentiality.
A. Except as provided in the last sentence of Section 18.J hereof, or
as otherwise required by law, Service Company will keep confidential all records
of and information in its possession relating to Fund or its shareholders or
shareholder accounts and will not disclose the same to any person except at the
request or with the consent of Fund.
B. Except as otherwise required by law, Fund will keep confidential all
financial statements and other financial records (other than statements and
records relating solely to Fund's business dealings with Service Company) and
all manuals, systems and other technical information and data, not publicly
disclosed, relating to Service Company's operations and programs furnished to it
by Service Company pursuant to this Agreement and will not disclose the same to
any person except at the request or with the consent of Service Company.
Notwithstanding anything to the contrary in this Section 22.B, if an attempt is
made pursuant to subpoena or other legal process to require Fund to disclose or
produce any of the aforementioned manuals, systems or other technical
information and data, Fund shall give Service Company prompt notice thereof
prior to disclosure or production so that Service Company may, at its expense,
resist such attempt.
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23. Survival of Representations and Warranties. All representations and
warranties by either party herein contained will survive the execution and
delivery of this Agreement.
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24. Miscellaneous.
A. This Agreement is executed and delivered in the State of Illinois
and shall be governed by the laws of said state (except as to Section 24.G
hereof which shall be governed by the laws of The Commonwealth of
Massachusetts).
B. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
C. 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.
D. This Agreement shall become effective as of the date hereof.
E. 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.
F. If any part, term or provision of this Agreement is held by the
courts to be illegal, in conflict with any law or otherwise invalid, the
remaining portion or portions shall be considered severable and not be affected,
and the rights and obligations of the parties shall be construed and enforced as
if the Agreement did not contain the particular part, term or provision held to
be illegal or invalid.
G. All parties hereto are expressly put on notice of Fund's Agreement
and Declaration of Trust which is on file with the Secretary of The Commonwealth
of Massachusetts, and the limitation of shareholder and trustee liability
contained therein. This Agreement has been executed by and on behalf of Fund by
its representatives as such representatives and not individually, and the
obligations of Fund hereunder are not binding upon any of the Trustees, officers
or shareholders of the Fund individually but are binding upon only the assets
and property of Fund. With respect to any claim by Service Company for recovery
of that portion of the compensation and expenses (or any other liability of Fund
arising hereunder) allocated to a particular Portfolio, whether in accordance
with the express terms hereof or otherwise, Service Company shall have recourse
solely against the assets of that Portfolio to satisfy such claim and shall have
no recourse against the assets of any other Portfolio for such purpose.
H. This Agreement, together with the Fee Schedule, is the entire
contract between the parties relating to the subject matter hereof and
supersedes all prior agreements between the parties.
13
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective duly authorized officer as of the day and year
first set forth above.
KEMPER FUNDS TRUST
By: /s/Mark S. Casady
------------------------------------
Mark S. Casady
President
KEMPER SERVICE COMPANY
By:
------------------------------------
Title:
14
Exhibit (h)(2)
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT dated this 28th day of December, 1998 by and between KEMPER FUNDS
TRUST, a Massachusetts business trust (the "Fund"), and KEMPER DISTRIBUTORS,
INC., a Delaware corporation ("KDI").
In consideration of the mutual covenants hereinafter contained, it is hereby
agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to provide information and administrative
services for the benefit of the Fund and its shareholders. In this regard, KDI
shall appoint various broker-dealer firms and other service or administrative
firms ("Firms") to provide related services and facilities for persons who are
investors in the Fund ("investors"). The Firms shall provide such office space
and equipment, telephone facilities, personnel or other services as may be
necessary or beneficial for providing information and services to investors in
the Fund. Such services and assistance may include, but are not limited to,
establishing and maintaining accounts and records, processing purchase and
redemption transactions, answering routine inquiries regarding the Fund and its
special features, assistance to investors in changing dividend and investment
options, account designations and addresses, and such other administrative
services as the Fund or KDI may reasonably request. Firms may include affiliates
of KDI. KDI may also provide some of the above services for the Fund directly.
KDI accepts such appointment and agrees during such period to render such
services and to assume the obligations herein set forth for the compensation
herein provided. KDI shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund. KDI, by separate agreement with the Fund, may
also serve the Fund in other capacities. In carrying out its duties and
responsibilities hereunder, KDI will appoint various Firms to provide
administrative and other services described herein directly to or for the
benefit of investors in the Fund. Such Firms shall at all times be deemed to be
independent contractors retained by KDI and not the Fund. KDI and not the Fund
will be responsible for the payment of compensation to such Firms for such
services.
2. For the administrative services and facilities described in Section 1, the
Fund will pay to KDI at the end of each calendar month an administrative service
fee computed at an annual rate of up to 0.25 of 1% of the average daily net
assets of the Fund (except assets attributable to Class I Shares). The current
fee schedule is set forth as Appendix I hereto. The administrative service fee
will be calculated separately for each class of each series of the Fund as an
expense of each such class; provided, however, no administrative service fee
shall be payable with respect to Class I Shares. For the month and year in which
this Agreement becomes effective or terminates, there shall be an appropriate
proration on the basis of the number of days that the Agreement is in effect
during such month and year, respectively. The services of KDI to the Fund under
this Agreement are not to be deemed exclusive, and KDI shall be free to render
similar services or other services to others.
<PAGE>
The net asset value for each share of the Fund shall be calculated in accordance
with the provisions of the Fund's current prospectus. On each day when net asset
value is not calculated, the net asset value of a share of the Fund shall be
deemed to be the net asset value of such a share as of the close of business on
the last day on which such calculation was made for the purpose of the foregoing
computations.
3. The Fund shall assume and pay all charges and expenses of its operations not
specifically assumed or otherwise to be provided by KDI under this Agreement.
4. This Agreement may be terminated at any time without the payment of any
penalty by the Fund or by KDI on sixty (60) days written notice to the other
party. Termination of this Agreement shall not affect the right of KDI to
receive payments on any unpaid balance of the compensation described in Section
2 hereof earned prior to such termination. This Agreement may not be amended for
any class of any series of the Fund to increase the amount to be paid to KDI for
services hereunder above .25 of 1% of the average daily net assets of such class
without the vote of a majority of the outstanding voting securities of such
class. All material amendments to this Agreement must in any event be approved
by vote of the Board of the Fund.
5. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
6. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
7. All parties hereto are expressly put on notice of the Fund's Agreement and
Declaration of Trust and all amendments thereto, all of which are on file with
the Secretary of The Commonwealth of Massachusetts, and the limitation of
shareholder and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations o the Fund thereunder
are not binding upon any of the trustees, officers or shareholders of the Fund
individually but are binding upon only the assets and property of the Fund.
8. This Agreement shall be construed in accordance with applicable federal law
and (except as to Section 7 hereof which shall be construed in accordance with
the laws of The Commonwealth of Massachusetts) the laws of the State of
Illinois.
[SIGNATURES APPEAR ON THE NEXT PAGE]
2
<PAGE>
IN WITNESS WHEREOF, the Fund and KDI have caused this Agreement to be executed
as of the day and year first above written.
KEMPER FUNDS TRUST
By: /s/Mark S. Casady
---------------------------
Mark S. Casady
President
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
---------------------------
James L. Greenawalt
President
3
<PAGE>
APPENDIX I
KEMPER FUNDS TRUST
FEE SCHEDULE FOR ADMINISTRATIVE SERVICES AGREEMENT
Pursuant to Section 2 of the Administrative Services Agreement to which this
Appendix is attached, the Fund and KDI agree that the administrative service fee
will be computed at an annual rate of .25 of 1% (the "Fee Rate") based upon
assets with respect to which a Firm provides administrative services.
KEMPER FUNDS TRUST
By: /s/Mark S. Casady
---------------------------
Mark S. Casady
President
KEMPER DISTRIBUTORS, INC.
By: /s/James L. Greenawalt
---------------------------
James L. Greenawalt
President
Dated: December 28, 1998
4
Exhibit (h)(3)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 28th day of December, 1998 between Kemper Funds
Trust (the "Fund"), on behalf of Kemper Large Company Growth Fund (hereinafter
called the "Portfolio"), a registered open-end management investment company
with its principal place of business in Chicago, Illinois, and Scudder Fund
Accounting Corporation, with its principal place of business in Boston,
Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records
and other documents as are required of the Fund under Section
31 of the Investment Company Act of 1940 (the "1940 Act") and
Rules 31a-1, 31a-2 and 31a-3 thereunder, applicable federal
and state laws and any other law or administrative rules or
procedures which may be applicable to the Fund on behalf of
the Portfolio, other than those accounts, books and financial
records required to be maintained by the Fund's investment
adviser, custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end
management investment company. All such books and records
shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection,
upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
c. Render statements or copies of records as from time to time
are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by
the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset
<PAGE>
value per share, the public offering price and/or its daily
dividend rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily Dividend
Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled to receive,
and may rely upon, information furnished it by means of Proper
Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
2
<PAGE>
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred, including, without
limitation, reasonable attorneys' fees and reasonable fees for pricing
services.
3
<PAGE>
Section 8. Amendment and Termination
This Agreement 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 an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND ACCOUNTING files, records of the
calculations of net asset value and all other records pertaining to its
services hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such records and
documents which it determines appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such
other person or at such other address as such party may from time to
time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn.: Vice President
If to the Fund - Portfolio: Kemper Funds Trust
222 South Riverside Plaza
Chicago, IL 60606
Attn.: President, Secretary or Treasurer
Section 11. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed
4
<PAGE>
hereto, but no such provisions shall be deemed to be an amendment of
this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of The Commonwealth of Massachusetts.
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.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
written above.
KEMPER FUNDS TRUST, on behalf of
Kemper Large Company Growth Fund
By: /s/Mark S. Casady
---------------------------
Mark S. Casady
President
SCUDDER FUND ACCOUNTING CORPORATION
By: /s/John R. Hebble
---------------------------
John R. Hebble
5
Exhibit (h)(4)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 28th day of December, 1998 between Kemper Funds
Trust (the "Fund"), on behalf of Kemper Research Fund (hereinafter called the
"Portfolio"), a registered open-end management investment company with its
principal place of business in Chicago, Illinois, and Scudder Fund Accounting
Corporation, with its principal place of business in Boston, Massachusetts
(hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement to
calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records and other
documents as are required of the Fund under Section 31 of the
Investment Company Act of 1940 (the "1940 Act") and Rules 31a-1, 31a-2
and 31a-3 thereunder, applicable federal and state laws and any other
law or administrative rules or procedures which may be applicable to
the Fund on behalf of the Portfolio, other than those accounts, books
and financial records required to be maintained by the Fund's
investment adviser, custodian or transfer agent and/or books and
records maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end management
investment company. All such books and records shall be the property
of the Fund and shall at all times during regular business hours be
open for inspection by, and shall be surrendered promptly upon request
of, duly authorized officers of the Fund. All such books and records
shall at all times during regular business hours be open for
inspection, upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of the
Securities and Exchange Commission.
b. Record the current day's trading activity and such other proper
bookkeeping entries as are necessary for determining that day's net
asset value and net income.
c. Render statements or copies of records as from time to time are
reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by the Fund
or by any regulatory body with jurisdiction over the Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in accordance
with Section 3 of the Agreement and notify the Fund and such other
persons as the Fund may reasonably request of the net asset
<PAGE>
value per share, the public offering price and/or its daily dividend
rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's Registration
Statement, as amended or supplemented from time to time (hereinafter
referred to as the "Registration Statement"); (b) the resolutions of the
Board of Trustees of the Fund at the time in force and applicable, as they
may from time to time be delivered to FUND ACCOUNTING, and (c) Proper
Instructions from such officers of the Fund or other persons as are from
time to time authorized by the Board of Trustees of the Fund to give
instructions with respect to computation and determination of the net asset
value. FUND ACCOUNTING may use one or more external pricing services,
including broker-dealers, provided that an appropriate officer of the Fund
shall have approved such use in advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily
Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value, including
net income, in a manner consistent with the specific provisions of the
Registration Statement. Such computation shall be made as of the time or
times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in the
Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making the necessary
computations FUND ACCOUNTING shall be entitled to receive, and may rely
upon, information furnished it by means of Proper Instructions, including
but not limited to:
a. The manner and amount of accrual of expenses to be recorded on the
books of the Portfolio;
b. The source of quotations to be used for such securities as may not be
available through FUND ACCOUNTING's normal pricing services;
c. The value to be assigned to any asset for which no price quotations
are readily available;
d. If applicable, the manner of computation of the public offering price
and such other computations as may be necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to rely
upon, as conclusive proof of any fact or matter required to be ascertained
by it hereunder, a certificate, letter or other instrument signed by an
authorized officer of the Fund or any other person
2
<PAGE>
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of Counsel
for the Fund at the reasonable expense of the Portfolio and shall be
without liability for any action taken or thing done in good faith in
reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or other
instrument or telephone call reasonably believed by FUND ACCOUNTING to be
genuine and to have been properly made or signed by any authorized officer
of the Fund or person certified to FUND ACCOUNTING as being authorized by
the Board of Trustees. The Fund, on behalf of the Portfolio, shall cause
oral instructions to be confirmed in writing. Proper Instructions may
include communications effected directly between electro-mechanical or
electronic devices as from time to time agreed to by an authorized officer
of the Fund and FUND ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to the appropriate
person(s) within FUND ACCOUNTING a copy of the Registration Statement as in
effect from time to time. FUND ACCOUNTING may conclusively rely on the
Fund's most recently delivered Registration Statement for all purposes
under this Agreement and shall not be liable to the Portfolio or the Fund
in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND ACCOUNTING
shall not be liable under this Agreement for any error of judgment or
mistake of law made in good faith and consistent with the foregoing
standard of care, provided that nothing in this Agreement shall be deemed
to protect or purport to protect FUND ACCOUNTING against any liability to
the Fund, the Portfolio or its shareholders to which FUND ACCOUNTING would
otherwise be subject by reason of willful misfeasance, bad faith or
negligence in the performance of its duties, or by reason of its reckless
disregard of its obligations and duties hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant to
this Agreement such compensation as may from time to time be agreed upon in
writing by the two parties. FUND ACCOUNTING shall be entitled, if agreed to
by the Fund on behalf of the Portfolio, to recover its reasonable
telephone, courier or delivery service, and all other reasonable
out-of-pocket, expenses as incurred, including, without limitation,
reasonable attorneys' fees and reasonable fees for pricing services.
3
<PAGE>
Section 8. Amendment and Termination
This Agreement 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 an instrument in writing delivered
or mailed to the other party. Such termination shall take effect not sooner
than sixty (60) days after the date of delivery or mailing of such notice
of termination. Any termination date is to be no earlier than four months
from the effective date hereof. Upon termination, FUND ACCOUNTING will turn
over to the Fund or its designee and cease to retain in FUND ACCOUNTING
files, records of the calculations of net asset value and all other records
pertaining to its services hereunder; provided, however, FUND ACCOUNTING in
its discretion may make and retain copies of any and all such records and
documents which it determines appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be deemed
to be exclusive, and it is understood that FUND ACCOUNTING may perform fund
accounting services for others. In acting under this Agreement, FUND
ACCOUNTING shall be an independent contractor and not an agent of the Fund
or the Portfolio.
Section 10. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such other
person or at such other address as such party may from time to time specify
in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn.: Vice President
If to the Fund - Portfolio: Kemper Funds Trust
222 South Riverside Plaza
Chicago, IL 60606
Attn.: President, Secretary or Treasurer
Section 11. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the consent
of the Fund as authorized or approved by resolution of its Board of
Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive of
or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive or
additional provisions shall be in writing, signed by both parties and
annexed
4
<PAGE>
hereto, but no such provisions shall be deemed to be an amendment of this
Agreement.
This Agreement shall be governed and construed in accordance with the laws
of The Commonwealth of Massachusetts.
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.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
written above.
KEMPER FUNDS TRUST, on behalf of
Kemper Research Fund
By: /s/Mark S. Casady
---------------------------
Mark S. Casady
President
SCUDDER FUND ACCOUNTING CORPORATION
By: /s/John R. Hebble
---------------------------
John R. Hebble
5
Exhibit (h)(5)
FUND ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made on the 28th day of December, 1998 between Kemper Funds
Trust (the "Fund"), on behalf of Kemper Small Cap Value+Growth Fund (hereinafter
called the "Portfolio"), a registered open-end management investment company
with its principal place of business in Chicago, Illinois, and Scudder Fund
Accounting Corporation, with its principal place of business in Boston,
Massachusetts (hereinafter called "FUND ACCOUNTING").
WHEREAS, the Portfolio has need to determine its net asset value which service
FUND ACCOUNTING is willing and able to provide;
NOW THEREFORE in consideration of the mutual promises herein made, the Fund and
FUND ACCOUNTING agree as follows:
Section 1. Duties of FUND ACCOUNTING - General
FUND ACCOUNTING is authorized to act under the terms of this Agreement
to calculate the net asset value of the Portfolio as provided in the
prospectus of the Portfolio and in connection therewith shall:
a. Maintain and preserve all accounts, books, financial records
and other documents as are required of the Fund under Section
31 of the Investment Company Act of 1940 (the "1940 Act") and
Rules 31a-1, 31a-2 and 31a-3 thereunder, applicable federal
and state laws and any other law or administrative rules or
procedures which may be applicable to the Fund on behalf of
the Portfolio, other than those accounts, books and financial
records required to be maintained by the Fund's investment
adviser, custodian or transfer agent and/or books and records
maintained by all other service providers necessary for the
Fund to conduct its business as a registered open-end
management investment company. All such books and records
shall be the property of the Fund and shall at all times
during regular business hours be open for inspection by, and
shall be surrendered promptly upon request of, duly authorized
officers of the Fund. All such books and records shall at all
times during regular business hours be open for inspection,
upon request of duly authorized officers of the Fund, by
employees or agents of the Fund and employees and agents of
the Securities and Exchange Commission.
b. Record the current day's trading activity and such other
proper bookkeeping entries as are necessary for determining
that day's net asset value and net income.
c. Render statements or copies of records as from time to time
are reasonably requested by the Fund.
d. Facilitate audits of accounts by the Fund's independent public
accountants or by any other auditors employed or engaged by
the Fund or by any regulatory body with jurisdiction over the
Fund.
e. Compute the Portfolio's public offering price and/or its daily
dividend rates and money market yields, if applicable, in
accordance with Section 3 of the Agreement and notify the Fund
and such other persons as the Fund may reasonably request of
the net asset
<PAGE>
value per share, the public offering price and/or its daily
dividend rates and money market yields.
Section 2. Valuation of Securities
Securities shall be valued in accordance with (a) the Fund's
Registration Statement, as amended or supplemented from time to time
(hereinafter referred to as the "Registration Statement"); (b) the
resolutions of the Board of Trustees of the Fund at the time in force
and applicable, as they may from time to time be delivered to FUND
ACCOUNTING, and (c) Proper Instructions from such officers of the Fund
or other persons as are from time to time authorized by the Board of
Trustees of the Fund to give instructions with respect to computation
and determination of the net asset value. FUND ACCOUNTING may use one
or more external pricing services, including broker-dealers, provided
that an appropriate officer of the Fund shall have approved such use in
advance.
Section 3. Computation of Net Asset Value, Public Offering Price, Daily
Dividend Rates and Yields
FUND ACCOUNTING shall compute the Portfolio's net asset value,
including net income, in a manner consistent with the specific
provisions of the Registration Statement. Such computation shall be
made as of the time or times specified in the Registration Statement.
FUND ACCOUNTING shall compute the daily dividend rates and money market
yields, if applicable, in accordance with the methodology set forth in
the Registration Statement.
Section 4. FUND ACCOUNTING's Reliance on Instructions and Advice
In maintaining the Portfolio's books of account and making the
necessary computations FUND ACCOUNTING shall be entitled to receive,
and may rely upon, information furnished it by means of Proper
Instructions, including but not limited to:
a. The manner and amount of accrual of expenses to be recorded on
the books of the Portfolio;
b. The source of quotations to be used for such securities as may
not be available through FUND ACCOUNTING's normal pricing
services;
c. The value to be assigned to any asset for which no price
quotations are readily available;
d. If applicable, the manner of computation of the public
offering price and such other computations as may be
necessary;
e. Transactions in portfolio securities;
f. Transactions in capital shares.
FUND ACCOUNTING shall be entitled to receive, and shall be entitled to
rely upon, as conclusive proof of any fact or matter required to be
ascertained by it hereunder, a certificate, letter or other instrument
signed by an authorized officer of the Fund or any other person
2
<PAGE>
authorized by the Fund's Board of Trustees.
FUND ACCOUNTING shall be entitled to receive and act upon advice of
Counsel for the Fund at the reasonable expense of the Portfolio and
shall be without liability for any action taken or thing done in good
faith in reliance upon such advice.
FUND ACCOUNTING shall be entitled to receive, and may rely upon,
information received from the Transfer Agent.
Section 5. Proper Instructions
"Proper Instructions" as used herein means any certificate, letter or
other instrument or telephone call reasonably believed by FUND
ACCOUNTING to be genuine and to have been properly made or signed by
any authorized officer of the Fund or person certified to FUND
ACCOUNTING as being authorized by the Board of Trustees. The Fund, on
behalf of the Portfolio, shall cause oral instructions to be confirmed
in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices as from time
to time agreed to by an authorized officer of the Fund and FUND
ACCOUNTING.
The Fund, on behalf of the Portfolio, agrees to furnish to the
appropriate person(s) within FUND ACCOUNTING a copy of the Registration
Statement as in effect from time to time. FUND ACCOUNTING may
conclusively rely on the Fund's most recently delivered Registration
Statement for all purposes under this Agreement and shall not be liable
to the Portfolio or the Fund in acting in reliance thereon.
Section 6. Standard of Care
FUND ACCOUNTING shall exercise reasonable care and diligence in the
performance of its duties hereunder. The Fund agrees that FUND
ACCOUNTING shall not be liable under this Agreement for any error of
judgment or mistake of law made in good faith and consistent with the
foregoing standard of care, provided that nothing in this Agreement
shall be deemed to protect or purport to protect FUND ACCOUNTING
against any liability to the Fund, the Portfolio or its shareholders to
which FUND ACCOUNTING would otherwise be subject by reason of willful
misfeasance, bad faith or negligence in the performance of its duties,
or by reason of its reckless disregard of its obligations and duties
hereunder.
Section 7. Compensation and FUND ACCOUNTING Expenses
FUND ACCOUNTING shall be paid as compensation for its services pursuant
to this Agreement such compensation as may from time to time be agreed
upon in writing by the two parties. FUND ACCOUNTING shall be entitled,
if agreed to by the Fund on behalf of the Portfolio, to recover its
reasonable telephone, courier or delivery service, and all other
reasonable out-of-pocket, expenses as incurred, including, without
limitation, reasonable attorneys' fees and reasonable fees for pricing
services.
3
<PAGE>
Section 8. Amendment and Termination
This Agreement 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 an instrument in writing
delivered or mailed to the other party. Such termination shall take
effect not sooner than sixty (60) days after the date of delivery or
mailing of such notice of termination. Any termination date is to be no
earlier than four months from the effective date hereof. Upon
termination, FUND ACCOUNTING will turn over to the Fund or its designee
and cease to retain in FUND ACCOUNTING files, records of the
calculations of net asset value and all other records pertaining to its
services hereunder; provided, however, FUND ACCOUNTING in its
discretion may make and retain copies of any and all such records and
documents which it determines appropriate or for its protection.
Section 9. Services Not Exclusive
FUND ACCOUNTING's services pursuant to this Agreement are not to be
deemed to be exclusive, and it is understood that FUND ACCOUNTING may
perform fund accounting services for others. In acting under this
Agreement, FUND ACCOUNTING shall be an independent contractor and not
an agent of the Fund or the Portfolio.
Section 10. Notices
Any notice shall be sufficiently given when delivered or mailed to the
other party at the address of such party set forth below or to such
other person or at such other address as such party may from time to
time specify in writing to the other party.
If to FUND ACCOUNTING: Scudder Fund Accounting Corporation
Two International Place
Boston, Massachusetts 02110
Attn.: Vice President
If to the Fund - Portfolio: Kemper Funds Trust
222 South Riverside Plaza
Chicago, IL 60606
Attn.: President, Secretary or Treasurer
Section 11. Miscellaneous
This Agreement may not be assigned by FUND ACCOUNTING without the
consent of the Fund as authorized or approved by resolution of its
Board of Trustees.
In connection with the operation of this Agreement, the Fund and FUND
ACCOUNTING may agree from time to time on such provisions interpretive
of or in addition to the provisions of this Agreement as in their joint
opinions may be consistent with this Agreement. Any such interpretive
or additional provisions shall be in writing, signed by both parties
and annexed
4
<PAGE>
hereto, but no such provisions shall be deemed to be an amendment of
this Agreement.
This Agreement shall be governed and construed in accordance with the
laws of The Commonwealth of Massachusetts.
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.
This Agreement constitutes the entire agreement between the parties
concerning the subject matter hereof, and supersedes any and all prior
understandings.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized as of the date first
written above.
KEMPER FUNDS TRUST, on behalf of
Kemper Small Cap Value+Growth Fund
By: /s/Mark S. Casady
--------------------------------------
Mark S. Casady
President
SCUDDER FUND ACCOUNTING CORPORATION
By: /s/John R. Hebble
---------------------------------------
John R. Hebble
5
[Dechert Price & Rhoads letterhead]
December 30, 1998
Kemper Funds Trust in respect of
Kemper Large Company Growth Fund,
Kemper Research Fund, and
Kemper Small Cap Value+Growth Fund
222 South Riverside Plaza
Chicago, Illinois 60606
Re: Pre-Effective Amendment No. 1 to the Registration Statement
on Form N-1A (File No. 333-65661) (the "Registration Statement")
Gentlemen:
Kemper Funds Trust (the "Trust") is a trust created under a written
Declaration of Trust dated October 14, 1998, as executed and delivered in
Boston, Massachusetts (the "Declaration of Trust"). The beneficial interest
thereunder is represented by transferable shares with a par value of $.01 per
share (the "Shares"). The Trustees have the powers set forth in the Declaration
of Trust, subject to the terms, provisions and conditions therein provided.
We are of the opinion that all legal requirements have been complied with
in the creation of the Trust and that said Declaration of Trust is legal and
valid.
Under Article V, Section 5.4 of the Declaration of Trust, the Trustees are
empowered, in their discretion, from time to time, to issue Shares for such
amount and type of consideration, at such time or times and on such terms as the
Trustees may deem best. Under Article V, Section 5.1, it is provided that the
number of Shares authorized to be issued under the Declaration of Trust is
unlimited. Under Article V, Section 5.11, the Trustees may authorize the
division of Shares into two or more series. By written instrument dated October
14, 1998, the sole initial Trustee of the Trust established the initial series
of the Trust designated as
<PAGE>
Kemper Funds Trust
December 30, 1998
Page 2
Kemper Large Company Growth Fund, Kemper Research Fund, and Kemper Small Cap
Value+Growth Fund.
By vote adopted on November 18, 1998, the Trustees of the Trust authorized
the President, any Vice President, the Secretary, and the Treasurer, from time
to time, to cause to be registered with the Securities and Exchange Commission
an indefinite number of Shares and to cause such Shares to be offered and sold
to the public.
We understand that you are about to file Pre-Effective Amendment No. 1 to
the Registration Statement.
We are of the opinion that all necessary Trust action precedent to the
issue of said Shares, comprising the Shares covered by Pre-Effective Amendment
No. 1 to the Registration Statement, has been duly taken, and that all such
Shares may be legally and validly issued for cash, and when sold will be fully
paid and non-assessable by the Trust upon receipt by the Trust or its agent of
consideration for such Shares in accordance with the terms in the Registration
Statement, subject to compliance with the Securities Act of 1933, as amended,
the Investment Company Act of 1940, as amended, and applicable state laws
regulating the sale of securities.
We consent to your filing this opinion with the Securities and Exchange
Commission as an Exhibit to Pre-Effective Amendment No. 1 to the Registration
Statement.
Very truly yours,
/s/DECHERT PRICE & RHOADS
DECHERT PRICE & RHOADS
2
Exhibit (j)(1)
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Independent Auditors
and Reports to Shareholders" and to the use of our report on the Kemper Funds
Trust - Kemper Large Company Growth Fund, Kemper Research Fund and Kemper Small
Cap Value+Growth Fund dated December 23, 1998 in the Registration Statement
(Form N-1A) of Kemper Funds Trust and in the related Prospectus and Statement of
Additional Information filed with the Securities and Exchange Commission in this
Pre-Effective Amendment No. 1 (File No. 333-65661) to the Registration Statement
under the Securities Act of 1933 and in this Amendment No. 1 to the Registration
Statement under the Investment Company Act of 1940 (File No. 811-09057).
ERNST & YOUNG LLP
Chicago, Illinois
December 23, 1998
Exhibit (j)(2)
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholder
Kemper Funds Trust -
Kemper Large Company Growth Fund
Kemper Research Fund
Kemper Small Cap Value+Growth Fund
We have audited the accompanying statement of net assets of Kemper Large Company
Growth Fund, Kemper Research Fund and Kemper Small Cap Value+Growth Fund,
comprising Kemper Funds Trust (the Trust) as of December 23, 1998 and the
related statement of operations for the period from November 18, 1998 to
December 23, 1998. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the above mentioned
Funds of Kemper Funds Trust at December 23, 1998 and the results of their
operations for the period from November 18, 1998 to December 23, 1998, in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
December 23, 1998
Exhibit (l)
PURCHASE AGREEMENT
Purchase Agreement dated December 23, 1998 between Kemper Funds Trust,
a business trust organized under the laws of The Commonwealth of Massachusetts
(the "Fund") and Scudder Kemper Investments, Inc. (the "Investment Manager"), a
corporation organized under the laws of the State of Delaware.
WHEREAS, the Fund is an investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Fund proposes to issue and sell shares of its shares of
beneficial interests, par value $0.01 per share (its "Shares") to the public
pursuant to a Registration Statement on Form N-1A (the "Registration Statement")
filed with the Securities and Exchange Commission; and
WHEREAS, Section 14(a) of the 1940 Act requires each registered
investment company to have a net worth of at least $100,000 before making a
public offering of its Shares;
NOW, THEREFORE, the Fund and the Investment Manager agree as follows:
1. The Fund offers to sell to the Investment Manager, and the Investment
Manager agrees to purchase from the Fund Shares of the Fund for an
aggregate price of $100,000 on a date to be specified by the Fund prior to
the effective date of the Registration Statement.
2. The Investment Manager represents and warrants to the Fund that the
Investment Manager is acquiring the Shares for investment purposes only and
not with a view to resale or further distribution.
3. The Investment Manager's right under this Purchase Agreement to purchase
the Shares is not assignable.
IN WITNESS WHEREOF, the Fund and the Investment Manager have caused
their duly authorized officers to execute this Purchase Agreement as of the date
first above written.
KEMPER FUNDS TRUST SCUDDER KEMPER INVESTMENTS, INC.
By: /s/Mark S. Casady By: /s/Stephen R. Beckwith
----------------- ----------------------
Name: Mark S. Casady Name: Stephen R. Beckwith
Title: President Title: Treasurer
Exhibit (m)(1)
Fund: Kemper Funds Trust (the "Fund")
------------------
Series: Kemper Large Company Growth Fund (the "Series")
--------------------------------
Class: Class B (the "Class")
-------
RULE 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Rule 12b-1 Plan (the "Plan") has been adopted for
the Fund, on behalf of the Series, for the Class (all as noted and defined
above) by a majority of the members of the Fund's Board (the "Board"), including
a majority of the Board members who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan (the "Qualified Board Members") at a
meeting called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI shall determine from time to time. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services fee shall be in addition
to and shall not be reduced or offset by the amount of any contingent deferred
sales charge received by KDI.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
Exhibit (m)(2)
Fund: Kemper Funds Trust (the "Fund")
------------------
Series: Kemper Large Company Growth Fund (the "Series")
--------------------------------
Class: Class C (the "Class")
-------
RULE 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Rule 12b-1 Plan (the "Plan") has been adopted for
the Fund, on behalf of the Series, for the Class (all as noted and defined
above) by a majority of the members of the Fund's Board (the "Board"), including
a majority of the Board members who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan (the "Qualified Board Members") at a
meeting called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI shall determine from time to time. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services fee shall be in addition
to and shall not be reduced or offset by the amount of any contingent deferred
sales charge received by KDI.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
Exhibit (m)(3)
Fund: Kemper Funds Trust (the "Fund")
-----------------
Series: Kemper Research Fund (the "Series")
--------------------
Class: Class B (the "Class")
-------
RULE 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Rule 12b-1 Plan (the "Plan") has been adopted for
the Fund, on behalf of the Series, for the Class (all as noted and defined
above) by a majority of the members of the Fund's Board (the "Board"), including
a majority of the Board members who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan (the "Qualified Board Members") at a
meeting called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI shall determine from time to time. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services fee shall be in addition
to and shall not be reduced or offset by the amount of any contingent deferred
sales charge received by KDI.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
Exhibit (m)(4)
Fund: Kemper Funds Trust (the "Fund")
------------------
Series: Kemper Research Fund (the "Series")
--------------------
Class: Class C (the "Class")
-------
RULE 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Rule 12b-1 Plan (the "Plan") has been adopted for
the Fund, on behalf of the Series, for the Class (all as noted and defined
above) by a majority of the members of the Fund's Board (the "Board"), including
a majority of the Board members who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan (the "Qualified Board Members") at a
meeting called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI shall determine from time to time. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services fee shall be in addition
to and shall not be reduced or offset by the amount of any contingent deferred
sales charge received by KDI.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
Exhibit (m)(5)
Fund: Kemper Funds Trust (the "Fund")
------------------
Series: Kemper Small Cap Value+Growth Fund (the "Series")
----------------------------------
Class: Class B (the "Class")
-------
RULE 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Rule 12b-1 Plan (the "Plan") has been adopted for
the Fund, on behalf of the Series, for the Class (all as noted and defined
above) by a majority of the members of the Fund's Board (the "Board"), including
a majority of the Board members who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan (the "Qualified Board Members") at a
meeting called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI shall determine from time to time. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services fee shall be in addition
to and shall not be reduced or offset by the amount of any contingent deferred
sales charge received by KDI.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
Exhibit (m)(6)
Fund: Kemper Funds Trust (the "Fund")
------------------
Series: Kemper Small Cap Value+Growth Fund (the "Series")
----------------------------------
Class: Class C (the "Class")
-------
RULE 12b-1 PLAN
Pursuant to the provisions of Rule 12b-1 under the Investment Company
Act of 1940 (the "Act"), this Rule 12b-1 Plan (the "Plan") has been adopted for
the Fund, on behalf of the Series, for the Class (all as noted and defined
above) by a majority of the members of the Fund's Board (the "Board"), including
a majority of the Board members who are not "interested persons" of the Fund and
who have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan (the "Qualified Board Members") at a
meeting called for the purpose of voting on this Plan.
1. Compensation. The Fund will pay to Kemper Distributors, Inc. ("KDI")
at the end of each calendar month a distribution services fee computed at the
annual rate of .75% of average daily net assets attributable to the Class
shares. KDI may compensate various financial service firms appointed by KDI
("Firms") in accordance with the provisions of the Fund's Underwriting and
Distribution Agreement (the "Distribution Agreement") for sales of shares at the
fee levels provided in the Fund's prospectus from time to time. KDI may pay
other commissions, fees or concessions to Firms, and may pay them to others in
its discretion, in such amounts as KDI shall determine from time to time. The
distribution services fee for the Class shall be based upon average daily net
assets of the Series attributable to the Class and such fee shall be charged
only to the Class. For the month and year in which this Plan becomes effective
or terminates, there shall be an appropriate proration of the distribution
services fee set forth in Paragraph 1 hereof on the basis of the number of days
that the Plan and any agreements related to the Plan are in effect during the
month and year, respectively. The distribution services fee shall be in addition
to and shall not be reduced or offset by the amount of any contingent deferred
sales charge received by KDI.
2. Periodic Reporting. KDI shall prepare reports for the Board on a
quarterly basis for the Class showing amounts paid to the various Firms and such
other information as from time to time shall be reasonably requested by the
Board.
3. Continuance. This Plan shall continue in effect indefinitely,
provided that such continuance is approved at least annually by a vote of a
majority of the Board, and of the Qualified Board Members, cast in person at a
meeting called for such purpose or by vote of at least a majority of the
outstanding voting securities of the Class.
4. Termination. This Plan may be terminated at any time without penalty
with respect to the Class by vote of a majority of the Qualified Board Members
or by vote of the majority of the outstanding voting securities of the Class.
<PAGE>
5. Amendment. This Plan may not be amended to increase materially the
amount to be paid to KDI by the Fund for distribution services with respect to
the Class without the vote of a majority of the outstanding voting securities of
the Class. All material amendments to this Plan must in any event be approved by
a vote of a majority of the Board, and of the Qualified Board Members, cast in
person at a meeting called for such purpose.
6. Selection of Non-Interested Board Members. So long as this Plan is
in effect, the selection and nomination of those Board members who are not
interested persons of the Fund will be committed to the discretion of Board
members who are not themselves interested persons.
7. Recordkeeping. The Fund will preserve copies of this Plan, the
Distribution Agreement, and all reports made pursuant to Paragraph 2 above for a
period of not less than six (6) years from the date of this Plan, the
Distribution Agreement, or any such report, as the case may be, the first two
(2) years in an easily accessible place.
8. Limitation of Liability. Any obligation of the Fund hereunder shall
be binding only upon the assets of the Class and shall not be binding on any
Board member, officer, employee, agent, or shareholder of the Fund. Neither the
authorization of any action by the Board members or shareholders of the Fund nor
the adoption of the Plan on behalf of the Fund shall impose any liability upon
any Board member or upon any shareholder.
9. Definitions. The terms "interested person" and "vote of a majority
of the outstanding voting securities" shall have the meanings set forth in the
Act and the rules and regulations thereunder.
10. Severability; Separate Action. If any provision of this Plan shall
be held or made invalid by a court decision, rule or otherwise, the remainder of
this Plan shall not be affected thereby. Action shall be taken separately for
the Series or Class as the Act or the rules thereunder so require.
Exhibit (o)
KEMPER MUTUAL FUNDS
MULTI-DISTRIBUTION SYSTEM PLAN
WHEREAS, each investment company adopting this Multi-Distribution
System Plan (each a "Fund" and collectively the "Funds") is an open-end
management investment company registered under the Investment Company Act of
1940 (the "1940 Act");
WHEREAS, Scudder Kemper Investments, Inc. serves as investment adviser
and Kemper Distributors, Inc. serves as principal underwriter for each Fund;
WHEREAS, each Fund has a non-Rule 12b-1 administrative services
agreement providing for a service fee at an annual rate of up to .25% of average
daily net assets;
WHEREAS, each Fund has established a Multi-Distribution System enabling
each Fund, as more fully reflected in its prospectus, to offer investors the
option of purchasing shares (a) with a front-end sales load (which may vary
among Funds) and a service fee ("Class A shares"); (b) without a front-end sales
load, but subject to a Contingent Deferred Sales Charge ("CDSC") (which may vary
among Funds), a Rule 12b-1 plan providing for a distribution fee, and a service
fee ("Class B shares"); (c) without a front-end sales load, but subject to a
CDSC (applicable to shares purchased on or after April 1, 1996 and which may
vary among Funds), a Rule 12b-1 Plan providing for a distribution fee, and a
service fee ("Class C shares"); and (d) for certain Funds, without a front-end
load, a CDSC, a distribution fee or a service fee ("Class I shares"); and
WHEREAS, Rule 18f-3 under the 1940 Act permits open-end management
investment companies to issue multiple classes of voting stock representing
interests in the same portfolio notwithstanding Sections 18(f)(1) and 18(i)
under the 1940 Act if, among other things, such investment companies adopt a
written plan setting forth the separate arrangement and expense allocation of
each class and any related conversion features or exchange privileges;
NOW, THEREFORE, each Fund, wishing to be governed by Rule 18f-3 under
the 1940 Act, hereby adopts this Multi-Distribution System Plan as follows:
1. Each class of shares will represent interests in the same portfolio
of investments of the Fund (or series), and be identical in all respects to each
other class, except as set forth below. The only differences among the various
classes of shares of the Fund (or series) will relate solely to: (a) different
distribution fee payments associated with any Rule 12b-1 Plan for a particular
class of shares and any other costs relating to implementing or amending such
Rule 12b-1 Plan (including obtaining shareholder approval of such Rule 12b-1
Plan or any amendment thereto), which will be borne solely by shareholders of
such classes; (b) different service fees; (c) different shareholder servicing
fees; (d) different class expenses, which will be limited to the following
expenses determined by the Fund board to be attributable to a specific class of
shares: (i) printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses, and proxy statements to
current shareholders of a specific class; (ii) Securities and Exchange
Commission registration fees incurred by a specific class; (iii) litigation or
other legal
<PAGE>
expenses relating to a specific class; (iv) board member fees or expenses
incurred as a result of issues relating to a specific class; and (v) accounting
expenses relating to a specific class; (e) the voting rights related to any Rule
12b-1 Plan affecting a specific class of shares; (f) conversion features; (g)
exchange privileges; and (h) class names or designations. Any additional
incremental expenses not specifically identified above that are subsequently
identified and determined to be properly applied to one class of shares of the
Fund (or a series) shall be so applied upon approval by a majority of the
members of the Fund's board, including a majority of the board members who are
not interested persons of the Fund.
2. Under the Multi-Distribution System, certain expenses may be
attributable to the Fund, but not to a particular series or class thereof. All
such expenses will be borne by each class on the basis of the relative aggregate
net assets of the classes, except that, if the Fund has series, expenses will
first be allocated among series, based upon their relative aggregate net assets.
Expenses that are attributable to a particular series, but not to a particular
class thereof, will be borne by each class of that series on the basis of the
relative aggregate net assets of the classes. Notwithstanding the foregoing, the
underwriter, the investment manager or other provider of services to the Fund
may waive or reimburse the expenses of a specific class or classes to the extent
permitted under Rule 18f-3 under the 1940 Act.
A class of shares may be permitted to bear expenses that are directly
attributable to hat class including: (a) any distribution fees associated with
any Rule 12b-1 Plan for a particular class and any other costs relating to
implementing or amending such Rule 12b-1 Plan (including obtaining shareholder
approval of such Rule 12b-1 Plan or any amendment thereto); (b) any service fees
attributable to such class; (c) any shareholder servicing fees attributable to
such class; and (d) any class expenses determined by the Fund board to be
attributable to such class.
3. After a shareholder's Class B shares have been outstanding for six
years, they will automatically convert to Class A shares of the Fund (or series)
at the relative net asset values of the two classes and will thereafter not be
subject to a Rule 12b-1 Plan; provided, however, that any Class B Shares issued
in exchange for shares originally classified as Initial Shares of Kemper
Portfolios, formerly known as Kemper Investment Portfolios (KP), whether in
connection with a reorganization with a series of KP or otherwise, shall convert
to Class A shares seven years after issuance of such Initial Shares if such
Initial Shares were issued prior to February 1, 1991. Class B shares issued upon
reinvestment of income and capital gain dividends and other distributions will
be converted to Class A shares on a pro rata basis with the Class B shares.
4. Any conversion of shares of one class to shares of another class is
subject to the continuing availability of a ruling of the Internal Revenue
Service or an opinion of counsel to the effect that the conversion of shares
does not constitute a taxable event under federal income tax law. Any such
conversion may be suspended if such a ruling or opinion is no longer available.
5. To the extent exchanges are permitted, shares of any class of the
Fund will be exchangeable with shares of the same class of another Fund, or with
money market fund shares as described in the applicable prospectus. Exchanges
will comply with all applicable provisions of Rule 11a-3 under the 1940 Act. For
purposes of calculating the time period remaining on the
2
<PAGE>
conversion of Class B shares to Class A shares, Class B shares received on
exchange retain their original purchase date.
6. Dividends paid by the Fund (or series) as to each class of its
shares, to the extent any dividends are paid, will be calculated in the same
manner, at the same time, on the same day, and will be in the same amount;
except that any distribution fees, service fees, shareholder servicing fees and
class expenses allocated to a class will be borne exclusively by that class.
7. Any distribution arrangement of the Fund, including distribution
fees, front-end sales loads and CDSCs, will comply with Article III, Section 26,
of the Conduct Rules of the National Association of Securities Dealers, Inc.
8. All material amendments to this Plan must be approved by a majority
of the members of the Fund's board, including a majority of the board members
who are not interested persons of the Fund.
Any open-end investment company may establish a Multi-Distribution
System and adopt this Multi-Distribution System Plan by approval of a majority
of the members of any such company's governing board, including a majority of
the board members who are not interested persons of such company.
For use on or after: April 1, 1996
3
