As filed with the Securities and Exchange Commission on September 28, 1999
1933 Act Registration No. 2-51992
1940 Act Registration No. 811-2527
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
--------
Post-Effective Amendment No. 46
--------
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 46
-----
ZURICH MONEY FUNDS
------------------
(formerly named Kemper Money Funds)
(Exact name of Registrant as Specified in Charter)
222 South Riverside Plaza, Chicago, Illinois 60606
-------------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (312) 537-7000
Philip J. Collora, Secretary With a copy to:
Zurich Money Funds Cathy G. O'Kelly
222 South Riverside Plaza David A. Sturms
Chicago, Illinois 60606-5808 Vedder, Price, Kaufman & Kammholz
(Name and Address of Agent for Service) 222 North LaSalle Street
Chicago, Illinois 60601
It is proposed that this filing will become effective
Immediately upon filing pursuant to paragraph (b)
--------
on ____________, 1999 pursuant to paragraph (b)
--------
60 days after filing pursuant to paragraph (a)(1)
--------
X on December 31, 1999 pursuant to paragraph (a)(1)
--------
75 days after filing pursuant to paragraph (a)(2)
--------
on __________, 1999 pursuant to paragraph (a)(2) of Rule 485
--------
If appropriate, check the following:
this post-effective amendment designates a new effective
date for a previously filed post-effective amendment
<PAGE>
[LOGO]
Zurich Money Funds
prospectus
December 1, 1999
Zurich Money Market Fund
Zurich Government Money Fund
Zurich Tax-Free Money Fund
As with all mutual funds, the Securities and Exchange Commission (SEC) does not
approve or disapprove these shares or determine whether the information in this
prospectus is truthful or complete. It is a criminal offense for anyone to
inform you otherwise.
<PAGE>
table of contents
how the funds work
2 Zurich Money Market Fund
6 Zurich Government Money Fund
10 Zurich Tax-Free Money Fund
14 Other Policies
15 Who Manages the Funds
16 Financial Highlights
how to invest in the funds
20 How to Buy Shares
22 How to Sell Shares
23 Policies You Should Know About
28 Understanding Distributions and Taxes
<PAGE>
how the funds work
These funds are money funds, meaning that they seek to maintain a stable $1.00
share price in order to preserve the value of your investment.
Each fund takes its own approach to money fund investing. One emphasizes yield,
while another emphasizes government securities for even higher credit quality
than money fund rules require. A third fund invests for income that is free from
federal income taxes.
Remember that money funds are investments, not bank deposits. They're not
insured or guaranteed by the FDIC or any other government agency. Their $1.00
share prices aren't guaranteed, so be aware that you could lose money.
<PAGE>
ticker symbol o OOOOO
Zurich Money Market Fund
The fund seeks maximum current income to the extent consistent with stability of
principal.
Investment Approach
The fund pursues its goal by investing exclusively in high quality short-term
securities, as well as repurchase agreements that are backed by these
securities.
The fund may buy securities from many types of issuers, including the U.S.
government, corporations, and municipalities. The fund may invest in securities
from foreign banks, and may invest more than 25% of total assets in obligations
of U.S. banks. However, everything the fund buys must meet the rules for money
market fund investments (see sidebar). In addition, the fund is stricter than
the rules in that it only buys securities that are in the top credit grade for
short-term securities and whose remaining maturities are no more than 365 days.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlook, and possible interest rate movements. The managers may adjust the
fund's exposure to interest rate risk, typically seeking to take advantage of
possible rises in interest rates and to preserve yield when interest rates
appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPH.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must
operate within strict federal rules. Designed to help maintain a stable share
price, these rules limit money funds to particular types of securities. Some of
the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
- --------------------------------------------------------------------------------
2 - Zurich Money Market Fund
<PAGE>
[ICON] This fund, a broadly diversified money fund with an equal
emphasis on credit quality, yield,and stability, could serve
investors who want a versatile money fund that's suited to a
range of purposes.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor affecting performance
is market interest rates. The fund's yields tend to reflect current interest
rates, which means that when these rates fall, the fund's yield generally falls
as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain sectors of the short-term securities
market, the fund increases its exposure to factors affecting these sectors. For
example, banks' repayment abilities could be compromised by broad economic
declines or sharp rises in interest rates. Securities from foreign banks may
have greater credit risk than comparable U.S. securities, for reasons ranging
from political and economic uncertainties to less stringent banking regulations.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality, or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
o securities that rely on outside insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
Zurich Money Market Fund 3
<PAGE>
The Fund's Track Record
The bar chart shows how the total returns for the fund's shares have varied from
year to year, which may give some idea of risk. The table shows how the fund's
returns over different periods average out.
All figures on this page assume reinvestment of dividends. As always, past
performance is no guarantee of future results.
Zurich Money Market Fund
Annual Total Returns (%)
- --------------------------------------------------------------------------------
as of 12/31 each year
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
`89 `90 `91 `92 `93 `94 `95 `96 `97 `98
Best quarter: 0.00%, Q0 1990
Worst quarter: 0.00%, Q0 1990
YTD total return: 0.00%, as of 9/30/1999
Average Annual Total Returns (%)
- --------------------------------------------------------------------------------
as of 12/31/1998
Since
1 Year 5 Years 10 Years inception
- -------------------------------------------------
0.00 0.00 0.00 0.00*
* Inception: 11/25/1974
To find out the fund's current seven-day yield, call 1-800-537-6001 or visit the
Zurich Funds Web site at www.zurichfunds.com.
4 Zurich Money Market
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
Based on the costs in the fee table (including one year of capped expenses in
each period), the example is designed to help you compare this fund's expenses
to those of other funds. The example assumes you invested $10,000, earned 5%
annual returns, reinvested all dividends, and sold your shares at the end of
each period. This is only an example; actual expenses will be different.
Zurich Money Market Fund
Fee Table
- --------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
- --------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- --------------------------------------------------------------------------------
Management Fee 0.00
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None
- --------------------------------------------------------------------------------
Other Expenses* 0.00
-----
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00
-----
- --------------------------------------------------------------------------------
Net Annual Operating Expenses** 0.00
* Includes costs of shareholder servicing, custody, accounting services, and
similar expenses, which may vary with fund size and other factors.
** By contract, total operating expenses are capped at 0.00% through 00/00/0000.
Example
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$0,000 $0,000 $0,000 $0,000
Zurich Money Market Fund 5
<PAGE>
ticker symbol o OOOOO
Zurich Government Money Fund
The fund seeks maximum current income to the extent consistent with stability of
principal.
Investment Approach
The fund pursues its goal by investing primarily in:
o short-term securities that are issued or guaranteed by the U.S. government
or its agencies or instrumentalities
o repurchase agreements backed by these securities
The securities the fund may buy range from U.S. Treasury obligations, which are
backed by the full faith and credit of the U.S. government, to securities of
issuers such as the Federal Home Loan Bank that carry no formal government
guarantees. Everything the fund buys must meet the rules for money market fund
investments (see sidebar). In addition, the fund is stricter than the rules in
that it only buys securities that are in the top credit grade for short-term
securities and whose remaining maturities are no more than 365 days.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as economic outlook and
possible interest rate movements. The managers may adjust the fund's exposure to
interest rate risk, typically seeking to take advantage of possible rises in
interest rates and to preserve yield when interest rates appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPH.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must
operate within strict federal rules. Designed to help maintain a stable share
price, these rules limit money funds to particular types of securities. Some of
the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
6 Zurich Government Money Fund
<PAGE>
[ICON] Investors whose primary concerns are credit quality, liquidity,
and stability may want to consider this fund.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor affecting performance
is market interest rates. The fund's yields tend to reflect current interest
rates, which means that when these rates fall, the fund's yield generally falls
as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. While the
risk of default is generally considered remote for any securities guaranteed by
the U.S. government, not all of the fund's securities carry this guarantee; some
are guaranteed only by the agency or instrumentality that issues them. Also,
bear in mind that any guarantees on securities the fund owns do not extend to
shares of the fund itself.
Because of the fund's high credit standards, its yield may be lower than the
yields of money funds that don't limit their investments to U.S. government and
agency securities.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality, or other matters
o the counterparty to a repurchase agreement or other transaction could
default on its obligations
Zurich Government Money Fund 7
<PAGE>
The Fund's Track Record
The bar chart shows how the total returns for the fund's shares have varied from
year to year, which may give some idea of risk. The table shows how the fund's
returns over different periods average out.
All figures on this page assume reinvestment of dividends. As always, past
performance is no guarantee of future results.
Zurich Government Money Fund
Annual Total Returns (%)
- --------------------------------------------------------------------------------
as of 12/31 each year
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
`89 `90 `91 `92 `93 `94 `95 `96 `97 `98
Best quarter: 0.00%, Q0 1990
Worst quarter: 0.00%, Q0 1990
YTD total return: 0.00%, as of 9/30/1999
Average Annual Total Returns (%)
- --------------------------------------------------------------------------------
as of 12/31/1998
Since
1 Year 5 Years 10 Years inception
- -------------------------------------------------
0.00 0.00 0.00 0.00*
* Inception: 10/30/1981
To find out the fund's current seven-day yield, call 1-800-537-6001 or visit the
Zurich Funds Web site at www.zurichfunds.com.
8 Zurich Government Money Fund
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
Based on the costs in the fee table (including one year of capped expenses in
each period), the example is designed to help you compare this fund's expenses
to those of other funds. The example assumes you invested $10,000, earned 5%
annual returns, reinvested all dividends, and sold your shares at the end of
each period. This is only an example; actual expenses will be different.
Zurich Government Money Fund
Fee Table
- --------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
- --------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- --------------------------------------------------------------------------------
Management Fee 0.00
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None
- --------------------------------------------------------------------------------
Other Expenses* 0.00
-----
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00
-----
- --------------------------------------------------------------------------------
Net Annual Operating Expenses** 0.00
* Includes costs of shareholder servicing, custody, accounting services, and
similar expenses, which may vary with fund size and other factors.
** By contract, total operating expenses are capped at 0.00% through 00/00/0000.
Example
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$0,000 $0,000 $0,000 $0,000
Zurich Government Money Fund 9
<PAGE>
ticker symbol o OOOOO
Zurich Tax-Free Money Fund
The fund seeks maximum current income that is exempt from federal income taxes
to the extent consistent with stability of principal.
Investment Approach
The fund pursues its goal by investing at least 80% of total assets in high
quality short-term municipal securities. The income from these securities is
free from regular federal income tax and from alternative minimum tax (AMT). The
fund may buy many types of municipal securities. However, everything the fund
buys must meet the rules for money market fund investments (see sidebar). In
addition, the fund is stricter than the rules in that it only buys securities in
the top credit grade for short-term securities.
Working in conjunction with credit analysts, the portfolio managers screen
potential securities and develop a list of those that the fund may buy. The
managers then decide which securities on this list to buy, looking for
attractive yield and weighing considerations such as credit quality, economic
outlook, and possible interest rate movements. The managers may adjust the
fund's exposure to interest rate risk, typically seeking to take advantage of
possible rises in interest rates and to preserve yield when interest rates
appear likely to fall.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING TWO PARAGRAPHS.
- --------------------------------------------------------------------------------
Money Fund Rules
To be called a money market fund, a mutual fund must
operate within strict federal rules. Designed to help maintain a stable share
price, these rules limit money funds to particular types of securities. Some of
the rules:
o individual securities must have remaining maturities of no more than 397
days
o the dollar-weighted average maturity of the fund's holdings cannot exceed
90 days
o all securities must be in the top two credit grades for short-term
securities and be denominated in U.S. dollars
- --------------------------------------------------------------------------------
10 Zurich Tax-Free Money Fund
<PAGE>
[ICON] This fund is designed for investors in a moderate to high
tax bracket who are looking for federally tax-free income
along with the liquidity and stability that a money fund is
designed to offer.
Main Risks To Investors
Money market funds are generally considered to have lower risks than other types
of mutual funds. Even so, there are several risk factors that could reduce the
yield you get from the fund or make it perform less well than other investments.
Although the fund seeks to preserve the value of your investment at $1.00 per
share, you could lose money by investing in the fund.
As with most money market funds, the most important factor affecting performance
is market interest rates. The fund's yield tends to reflect current interest
rates, which means that when these rates fall, the fund's yield generally falls
as well.
A second factor is credit quality. If a portfolio security declines in credit
quality or goes into default, it could hurt the fund's performance. To the
extent that the fund emphasizes certain geographic regions or sectors of the
short-term securities market, the fund increases its exposure to factors
affecting these regions or sectors.
Other factors that could affect performance include:
o the managers could be incorrect in their analysis of interest rate trends,
credit quality, or other matters
o securities that rely on outside insurers to raise their credit quality
could fall in price or go into default if the financial condition of the
insurer deteriorates
o political or legal actions could change the way the fund's dividends are
taxed
Zurich Tax-Free Money Fund 11
<PAGE>
The Fund's Track Record
The bar chart shows how the total returns for the fund's shares have varied from
year to year, which may give some idea of risk. The table shows how the fund's
returns over different periods average out.
All figures on this page assume reinvestment of dividends. As always, past
performance is no guarantee of future results.
Zurich Tax-Free Money Fund
Annual Total Returns (%)
- --------------------------------------------------------------------------------
as of 12/31 each year
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
`89 `90 `91 `92 `93 `94 `95 `96 `97 `98
Best quarter: 0.00%, Q0 1990
Worst quarter: 0.00%, Q0 1990
YTD total return: 0.00%, as of 9/30/1999
Average Annual Total Returns (%)
- --------------------------------------------------------------------------------
as of 12/31/1998
Since
1 Year 5 Years 10 Years inception
- -------------------------------------------------
0.00 0.00 0.00 0.00*
* Inception: 9/10/1987
To find out the fund's current seven-day yield, call 1-800-537-6001 or visit the
Zurich Funds Web site at www.zurichfunds.com.
12 Zurich Tax-Free Money Fund
<PAGE>
How Much Investors Pay
This fund has no sales charges or other shareholder fees. The fund does have
annual operating expenses, and as a shareholder you pay them indirectly.
Based on the costs in the fee table (including one year of capped expenses in
each period), the example is designed to help you compare this fund's expenses
to those of other funds. The example assumes you invested $10,000, earned 5%
annual returns, reinvested all dividends, and sold your shares at the end of
each period. This is only an example; actual expenses will be different.
Zurich Tax-Free Money Fund
Fee Table
- --------------------------------------------------------------------------------
Shareholder Fees (%)
(paid directly from your investment) None
- --------------------------------------------------------------------------------
Annual Operating Expenses (%)
(deducted from fund assets)
- --------------------------------------------------------------------------------
Management Fee 0.00
- --------------------------------------------------------------------------------
Distribution (12b-1) Fee None
- --------------------------------------------------------------------------------
Other Expenses* 0.00
-----
- --------------------------------------------------------------------------------
Total Annual Operating Expenses 0.00
- --------------------------------------------------------------------------------
Expense Reimbursement 0.00
-----
- --------------------------------------------------------------------------------
Net Annual Operating Expenses** 0.00
* Includes costs of shareholder servicing, custody, accounting services, and
similar expenses, which may vary with fund size and other factors.
** By contract, total operating expenses are capped at 0.00% through 00/00/0000.
Example
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$0,000 $0,000 $0,000 $0,000
Zurich Tax-Free Money Fund 13
<PAGE>
other policies
While the fund-by-fund sections on the previous pages describe the main points
of each fund's strategy and risks, there are a few other issues to know about:
o As a temporary defensive measure, Zurich Tax-Free Money Fund could shift up
to 100% of assets into cash or into investments such as taxable money
market securities. This would mean that the fund was not pursuing its goal.
o The funds' investment advisor establishes a security's credit grade at the
time it buys securities, using independent ratings or, for unrated
securities, its own credit ratings. If a security's credit quality falls,
the security will be sold unless the advisor or the Board believes this
would not be in the shareholders' best interests.
Year 2000 Readiness
Like all mutual funds, these funds could be affected by the inability of some
computer systems to recognize the year 2000. The investment advisor has a year
2000 readiness program designed to address this problem, and is also researching
the readiness of suppliers and business partners as well as issuers of
securities the funds own. Still, there's some risk that the year 2000 problem
could materially affect a fund's operations (such as its ability to calculate
net asset value and process purchases and redemptions), its investments, or
securities markets in general.
THE FOLLOWING SIDEBAR TEXT APPEARS NEXT TO THE PRECEDING PARAGRAPH.
- --------------------------------------------------------------------------------
For More Information
This prospectus doesn't tell you about every policy or risk of investing in the
funds.
If you want more information on a fund's allowable securities and investment
practices and the characteristics and risks of each one, you may want to request
a copy of the Statement of Additional Information (the back cover has
information on how to do this).
Keep in mind that there is no assurance that any mutual fund will achieve its
goal.
- --------------------------------------------------------------------------------
14 Zurich Tax-Free Money Fund
<PAGE>
who manages the funds
The Investment Advisor
The investment advisor for these funds is Scudder Kemper Investments, Inc.,
located at 345 Park Avenue, New York, NY 10154-0010. Scudder Kemper has more
than 70 years of experience managing mutual funds, and currently has more than
$xxx billion in assets under management.
Each fund is managed by a team of investment professionals, who individually
represent different areas of expertise and who together develop investment
strategies and make buy and sell decisions. Supporting the fund managers are
Scudder Kemper's many economists, research analysts, traders, and other
investment specialists, located in offices across the United States and around
the world.
As payment for serving as investment advisor, Scudder Kemper receives a
management fee from each fund. Below are the actual rates paid by each fund for
the 12 months through the most recent fiscal year end, as a percentage of its
average daily net assets:
Fund Name Fee Paid
- --------------------------------------------------------------------------------
Zurich Money Market Fund 0.00%
- --------------------------------------------------------------------------------
Zurich Government Money Fund 0.00%
- --------------------------------------------------------------------------------
Zurich Tax-Free Money Fund 0.00%
The Portfolio Manager
The portfolio managers handle the day-to-day management of the funds. The lead
manager for each of these funds is Frank Rachwalski. Mr. Rachwalski, who began
his investment career when he joined the advisor in 1973, has managed each of
the funds since its inception.
[ICON] Scudder Kemper, the company with overall responsibility for
managing the funds, takes a team approach to asset
management.
Who Manages the Funds 15
<PAGE>
financial highlights
These tables are designed to help you understand each fund's financial
performance in recent years. The figures in the first part of each table are for
a single share. The total return figures represent the percentage that an
investor in a particular fund would have earned, assuming all dividends and
distributions were reinvested. This information has been audited by Ernst &
Young LLP, whose report, along with each fund's financial statements, is
included in that fund's annual report (see "Shareholder reports" on the back
cover).
Zurich Money Market Fund
<TABLE>
<CAPTION>
Years Ended July 31, 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net investment income and
dividends declared 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net asset value, end of year 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Total return (%) 0.00 0.00 0.00 0.00 0.00
Ratios and supplemental data
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 000,000 000,000 000,000 000,000 000,000
</TABLE>
Financial Highlights 16
<PAGE>
Zurich Government Money Fund
<TABLE>
<CAPTION>
Years Ended July 31, 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net investment income and
dividends declared 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net asset value, end of year 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Total return (%) 0.00 0.00 0.00 0.00 0.00
Ratios and supplemental data
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 000,000 000,000 000,000 000,000 000,000
</TABLE>
Financial Highlighst 17
<PAGE>
Zurich Tax-Free Money Fund
<TABLE>
<CAPTION>
Years Ended July 31, 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net investment income and
dividends declared 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net asset value, end of year 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Total return (%) 0.00 0.00 0.00 0.00 0.00
Ratios and supplemental data
- ----------------------------------------------------------------------------------------
Ratio of expenses to average net assets 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 0.00 0.00 0.00 0.00 0.00
- ----------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 000,000 000,000 000,000 000,000 000,000
</TABLE>
18 Financial Highlights
<PAGE>
how to invest in the funds
The following pages tell you how to invest in these funds and what to expect as
a shareholder. If you're investing directly with Zurich, all of this information
applies to you.
If you're investing through a "third party provider" -- for example, a financial
adviser or workplace retirement plan -- your provider may have its own policies
or instructions, and you should follow those.
Different terms also apply to investors who are using one of these funds as the
core account for a Zurich MoneyPLUS Account(SM). Your account materials describe
the special services and other policies and features that apply to your account.
<PAGE>
how to buy shares
<TABLE>
<CAPTION>
INITIAL INVESTMENT
- ----------------------------------------------------------------------------------------
<S> <C>
$1,000 or more for regular accounts
$250 or more for IRAs
$50 or more with an Automatic Purchase Plan
Make out your check to "Zurich Money Funds"
- ----------------------------------------------------------------------------------------
By mail o Fill out and sign an application
o Send the application and an investment check to:
Kemper Service Company, P.O. Box 219356,
Kansas City, MO 64121-9356
- ----------------------------------------------------------------------------------------
By wire o Call 1-800-537-6001
o Give your account registration instructions to the representative,
who will give you a new account number
o Wire your investment using the wire instructions for additional
investments on the following page
- ----------------------------------------------------------------------------------------
With an o For investing directly from your bank account, paycheck or
automatic government check
purchase plan
o Call 1-800-537-6001 to set up a plan
- ----------------------------------------------------------------------------------------
By exchange o To invest in one of these funds by selling shares in a Kemper fund
or another Zurich fund, call 1-888-ZURICH-1
- ----------------------------------------------------------------------------------------
On the o See the instructions at www.zurichfunds.com
internet
o Click on "New Account Kit"
- ----------------------------------------------------------------------------------------
Through a o Contact your representative using the method that's most
financial convenient for you
planner
</TABLE>
[ICON] Zurich telephone representatives are available on business days
from 7 a.m. to 6 p.m. Central time and on Saturdays from 8 a.m.
to 3 p.m. Call toll-free 1-888-ZURICH-1 (that's 1-888-987-4241).
20 How to Buy Shares
<PAGE>
<TABLE>
<CAPTION>
Additional investments
- -----------------------------------------------------------------------------------------
<S> <C>
$100 or more for regular accounts
$50 or more for IRAs
$50 or more a month with an Automatic Purchase Plan
Make out your check to "Zurich Money Funds"
- -----------------------------------------------------------------------------------------
By mail o Send a check and a Zurich investment slip to:
Kemper Service Company, P.O. Box 219154,
Kansas City, MO 64121-7197
o No investment slip? Enclose a letter with your name, account
number, full fund name, and your investment instructions
- -----------------------------------------------------------------------------------------
By wire o Have your bank wire your investment to: Zurich Money Funds, United
Missouri Bank of Kansas City, N.A. ABA# 1010-0069-5
o You will also need to provide your name, account number, and
the name and routing number of the fund of your choice:
o Zurich Money Market Fund: 98-0103-346-8
o Zurich Government Money Fund: 98-0116-259-4
o Zurich Tax-Free Money Fund: 98-0001-577-6
- -----------------------------------------------------------------------------------------
By EZ-Transfer o Call 1-888-ZURICH-1 to make sure EZ-Transfer is set up on you
account; once it is, you can use it to make regular
investments or other transfers fromyour bank account by
calling 1-888-ZURICH-1
- -----------------------------------------------------------------------------------------
With an o For investing directly from your bank account, pay check or
automatic government check
purchase plan
o Call 1-888-ZURICH-1 to set up a plan
- -----------------------------------------------------------------------------------------
By exchange o To invest in one of these funds by selling shares in a Kemper
fund or another Zurich fund, call 1-888-ZURICH-1
- -----------------------------------------------------------------------------------------
On the o See the instructions at www.zurichfunds.com
internet
o Click on "Account Access"
- -----------------------------------------------------------------------------------------
Through a o Contact your representative using the method that's most
financial convenient for you
planner
[ICON] Sending an investment by express, registered, or certified mail? Use
this address: Kemper Service Company, 811 Main Street, Kansas City, MO
64105-2005
</TABLE>
How to Buy Shares 21
<PAGE>
how to sell shares
<TABLE>
<CAPTION>
Selling Shares
- ----------------------------------------------------------------------------------------------
Some transactions, including most for over $50,000, can only
be ordered in writing; for more information, see page 26
- ----------------------------------------------------------------------------------------------
<S> <C>
By check o Write a check on your account for at least $500
- ----------------------------------------------------------------------------------------------
By phone o Call 1-888-ZURICH-1 for instructions; a check will be mailed
to the address of record
- ----------------------------------------------------------------------------------------------
By wire o Call 1-888-ZURICH-1 to make sure that wire transfer is set up
on your account; if it is, you can request a wire to your bank account
- ----------------------------------------------------------------------------------------------
By EZ-Transfer o Call 1-888-ZURICH-1 to make sure that EZ-Transfer is set up on
your account; if it is, you can request a transfer to your
bank account of any amount between $100 and $50,000
- ----------------------------------------------------------------------------------------------
By exchange o To sell shares in a Kemper fund or another Zurich fund and invest
in one of these funds, call 1-888-ZURICH-1
- ----------------------------------------------------------------------------------------------
By mail o Write a letter that includes:
o the fund and account number from which you want to sell
shares
o the dollar amount you want to sell
o your name(s), signature(s), and address, exactly as on your account
o Send the letter to: Kemper Service Company, P.O. Box 219557,
Kansas City, MO 64121-9557
- ----------------------------------------------------------------------------------------------
With an o To set up regular exchanges or withdrawals among Kemper or Zurich
automatic funds, call 1-888-ZURICH-1
exchange or
withdrawal
plan
- ----------------------------------------------------------------------------------------------
On the o Follow the instructions at www.zurichfunds.com
internet
o Click on "Account Access"
- ----------------------------------------------------------------------------------------------
Through a o Contact your representative using the method that's most
financial convenient for you
planner
</TABLE>
[ICON] Zurich telephone representatives are available on business
days from 7 a.m. to 6 p.m. Central time and on Saturdays from
8 a.m. to 3 p.m. Call toll-free 1-888-ZURICH-1 (that's
1-888-987-4241).
22 How to Sell Shares
<PAGE>
policies you should know about
Along with the instructions on the previous pages, the policies below may affect
you as a shareholder.
If you are investing through an investment provider, check the materials you got
from them. As a general rule, you should follow the information in those
materials wherever it contradicts the information given here. Please note that
an investment provider may charge its own fees.
Policies about transactions
The funds are open for business whenever the New York Stock Exchange is open.
The Money Market and Government Money Fund calculate their share price three
times every business day, first at 11 a.m. Central time then at 1 p.m. Central
time, and again as of the close of regular trading on the Exchange (typically 3
p.m. Central time, but sometimes earlier, as in the case of scheduled half-day
trading or unscheduled suspensions of trading). The Tax Free Money Fund
calculates its share price at 11 a.m. and again as of the close of regular
trading on the Exchange.
Although shares trade during business hours, you can place orders anytime. Once
an order is received by Kemper Service Company, and they have determined that it
is a "good order," it will be processed at the next share price calculated.
Because orders placed through investment providers must be forwarded to Kemper
Service Company before they can be processed, you'll need to allow extra time. A
representative of your investment provider should be able to tell you when your
order will be processed.
Ordinarily, your investment will start to accrue dividends the next business day
after your purchase is processed. However, wire transactions that arrive by 1
p.m. Central time (11 a.m. for the Tax-Free Money Fund) will receive that day's
dividend.
Policies You Should Know About 23
<PAGE>
When selling shares, you'll generally receive the dividend for the day on which
your shares were sold. If we receive a sell request before 11 a.m. Central time
and the request calls for proceeds to be sent out by wire, we will wire you the
proceeds on the same day. However, you won't receive that day's dividend.
EZ-Transfer lets you set up a link between a Zurich account and a bank account.
Once this link is in place, you can move money between the two with a phone
call. You'll need to make sure your bank has Automated Clearing House (ACH)
services. Transactions take two to three days to be completed, and there is a
$100 minimum. To set up EZ-Transfer on a new account, see the account
application; to add it to an existing account, call 1-888-ZURICH-1
(1-888-987-4241).
Share certificates are available on written request. However, we don't recommend
them unless you want them for a specific purpose, because they can only be sold
by mailing them in, and if they're ever lost they're difficult and expensive to
replace.
Checkwriting lets you sell fund shares by writing a check. Your investment keeps
earning dividends until your check clears. Please note that you'll be charged a
$10 service fee when you write a check for less than $500. You'll also be
charged a $10 service fee when you write a check that's larger than your balance
at the time the check is presented to us, and we will not be able to honor the
check. We also cannot honor any check for more than $5,000,000, or any check
written on an account on which there is a Power of Attorney. It's not a good
idea to close out an account using a check because the account balance could
change between the time you write the check and the time it is processed.
24 Policies You Should Know About
<PAGE>
[ICON] If you ever have difficulty placing an order by phone, you can
always send us your order in writing.
If you are investing in these funds through a Zurich MoneyPLUS Account(SM), you
have access to a number of different features and your policies and fees are
different in some cases. For example, there is no minimum dollar amount on
checks you write, and you can access your account using a VISA(R) Check Card (a
debit card). For more information on the Zurich MoneyPLUS Account, its cash
management features and its policies and expenses, call 1-800-537-6001.
When you call us to sell shares, we may record the call, ask you for certain
information, or take other steps designed to prevent fraudulent orders. It's
important to understand that as long as we take reasonable steps to ensure that
an order appears genuine, we are not responsible for any losses that may occur.
When you ask us to send or receive a wire, please note that while we don't
charge a fee to send or receive wires, it's possible that your bank may do so.
Wire transactions are completed within 24 hours. The funds can only accept wires
of $1,000 or more.
Exchanges between these funds and other Zurich funds, as well as most Kemper
funds, are an option for most shareholders. Exchanges are a shareholder
privilege, not a right: we may reject any exchange order, particularly when
there appears to be a pattern of "market timing" or other frequent purchases and
sales. We may also reject purchase orders, for these or other reasons.
Policies You Should Know About 25
<PAGE>
When you want to sell more than $50,000 worth of shares, you'll usually need to
place your order in writing and include a signature guarantee. The only
exception is if you want money wired to a bank account that is already on file
with us; in that case, you don't need a signature guarantee. Also, you don't
need a signature guarantee for an exchange, although we may require one in
certain other circumstances.
A signature guarantee is simply a certification of your signature -- a valuable
safeguard against fraud. You can get a signature guarantee from most brokerages
and most banks, savings institutions, and credit unions. Note that you can't get
a signature guarantee from a notary public.
Money from shares you sell is normally sent out within one business day of when
your order is processed (not when it is received), although it could be delayed
for up to seven days. There are also two circumstances when it could be longer:
when you are selling shares you bought recently by check and that check hasn't
cleared yet (maximum delay: 15 days) or when unusual circumstances prompt the
SEC to allow further delays.
How the funds calculate share price
For each fund in this prospectus, the share price is the net asset value per
share, or NAV. To calculate NAV, the funds use the following equation:
Total assets - total liabilities
---------------------------------- = NAV
Total Number of shares outstanding
As noted earlier, each fund seeks to maintain a stable $1.00 share price.
In valuing securities, we typically use the amortized cost method (the method
used by most money market funds).
26 Policies You Should Know About
<PAGE>
Other rights we reserve
For each fund in this prospectus, you should be aware that we may do any of the
following:
o withhold 31% of your distributions as federal income tax if you have
been notified by the IRS that you are subject to backup withholding, or
if you fail to provide us with a correct taxpayer ID number or
certification that you are exempt from backup withholding
o charge you $3 a month if your account balance is below $1,000 for the
last 30 days; this policy doesn't apply to retirement accounts, or to
funds with an automatic investment plan
o reject a new account application if you don't provide a correct Social
Security or other tax ID number; if the account has already been
opened, we may give you 30 days' notice to provide the correct number
o pay you for shares you sell by "redeeming in kind," that is, by giving
you marketable securities (which typically will involve brokerage costs
for you to liquidate) rather than cash; in most cases, a fund won't
make a redemption in kind unless your requests over a 90-day period
total more than $250,000 or 1% of the fund's assets, whichever is less
o change, add, or withdraw various services, fees, and account policies
(for example, we may change or terminate the exchange privilege at any
time)
o reject or limit purchases of shares for any reason
Policies You Should Know About 27
<PAGE>
understanding distributions
and taxes
By law, a mutual fund is required to pass through to its shareholders virtually
all of its net earnings. A fund can earn money in two ways: by receiving
interest, dividends or other income from securities it holds, and by selling
securities for more than it paid for them. (A fund's earnings are separate from
any gains or losses stemming from your own purchase of shares.) A fund may not
always pay a distribution for a given period.
The funds intend to declare income dividends daily, and pay them monthly. Zurich
Tax-Free Money Fund may make short- or long-term capital gains distributions in
November or December. The taxable money funds may take into account capital
gains and losses (other than net long-term capital gains) in their daily
dividend declarations. The funds may make additional distributions for tax
purposes if necessary.
You can choose how to receive your dividends and distributions. You can have
them all automatically reinvested in fund shares or all sent to you by check.
Tell us your preference on your application. If you don't indicate a preference,
your dividends and distributions will all be reinvested. For retirement plans,
reinvestment is the only option.
Dividends from Zurich Money Market Fund and Zurich Government Money Fund are
generally taxed at ordinary income rates. Any long-term capital gains
distributions are generally taxed at capital gains rates, although the funds
typically don't expect to make long-term capital gains distributions. Also,
because each fund seeks to maintain a stable share price, you are unlikely to
have a capital gain or loss when you sell fund shares. For tax purposes, an
exchange is the same as a sale.
28 Understanding Distributions and Taxes
<PAGE>
Dividends from Zurich Tax-Free Money Fund are generally free from federal income
tax for most shareholders, and a portion of dividends from Zurich Government
Money Fund are generally free from state and local income tax. However, there
are a few exceptions:
o a portion of a fund's dividends may be taxable as ordinary income if it
came from investments in taxable securities, tax-exempt market discount
bonds, or as the result of short-term capital gains
o with Zurich Tax Free Money Fund, because the fund can invest up to 20%
of net assets in securities whose income is subject to the federal
alternative minimum tax (AMT), you may owe taxes on a portion of your
dividends if you are among those investors who must pay AMT
o with Zurich Government Money Fund, shareholders who live in certain
states and localities may not be eligible for the tax exemptions that
shareholders in most locations are
Each fund will send you detailed tax information every January. These statements
tell you the amount and the tax category of any dividends or distributions you
received. They also have certain details on your purchases and sales of shares.
The tax status of dividends and distributions is the same whether you reinvest
them or not. Dividends or distributions declared in the last quarter of a given
year are taxed in that year, even though you may not receive the money until the
following January.
Understanding Distributions and Taxes 29
<PAGE>
to get more information
Shareholder reports -- These include commentary from each fund's management team
about recent market conditions and the effects of a fund's strategies on its
performance. For each fund, they also have detailed performance figures, a list
of everything the fund owns, and the fund's financial statements. Shareholders
get these reports automatically. To reduce costs, we mail one copy per
household. For more copies, call 1-800-537-6001.
Statement of Additional Information (SAI) -- This tells you more about each
fund's features and policies, including additional risk information. The SAI is
incorporated by reference into this document (meaning that it's legally part of
this prospectus).
If you'd like to ask for copies of these documents, or if you're a shareholder
and have questions, please contact Zurich or the SEC (see below). Materials you
get from Zurich are free; those from the SEC involve a copying fee. If you like,
you can look over these materials in person at the SEC's Public Reference Room
in Washington, DC.
SEC 450 Fifth Street, N.W., Washington, DC 20549-6009, www.sec.gov,
1-800-SEC-0330.
Fund Name SEC File #
- --------------------------------------------------------------------------------
Zurich Money Market Fund 000-0000
- --------------------------------------------------------------------------------
Zurich Government Money Fund 000-0000
- --------------------------------------------------------------------------------
Zurich Tax-Free Money Fund 000-0000
[LOGO]
Kemper Distributors, Inc.
222 South Riverside Plaza
Chicago, IL 60606-5808
www.zurichfunds.com
1-800-537-6001
<PAGE>
ZURICH MONEY FUNDS
STATEMENT OF ADDITIONAL INFORMATION
December 1, 1999
Zurich Money Market Fund
Zurich Government Fund
Zurich Tax-Free Money Fund
222 South Riverside Plaza, Chicago, Illinois 60606-5808
(800) 537-6001
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Zurich Money Funds (the "Trust") dated
December 1, 1999. The prospectus may be obtained without charge by calling or
writing Zurich Money Funds, and also available along with other related
materials on the SEC's internet web site (http://www.sec.gov).
TABLE OF CONTENTS
INVESTMENT RESTRICTIONS....................................2
OTHER INVESTMENT STRATEGIES AND RISKS......................4
Zurich Money Market Fund...................................5
Zurich Government Money Fund...............................6
Zurich Tax-Free Money Fund ................................6
Additional Investment Information About the Funds.........10
INVESTMENT ADVISER........................................11
PORTFOLIO TRANSACTIONS....................................13
PURCHASE AND REDEMPTION OF SHARES.........................15
DIVIDENDS, NET ASSET VALUE AND TAXES......................17
PERFORMANCE...............................................19
OFFICERS AND TRUSTEES.....................................23
SPECIAL FEATURES..........................................25
SHAREHOLDER RIGHTS........................................25
APPENDIX -- RATINGS OF INVESTMENTS........................27
The financial statements appearing in the Funds' 1999 Annual Report to
Shareholders are incorporated herein by reference. The Funds' Annual Report
accompanies this Statement of Additional Information and may be obtained without
charge by calling toll-free 1-888-.
LOGO
printed on recycled paper
<PAGE>
INVESTMENT RESTRICTIONS
The Zurich Money Market Fund (the "Money Market Fund"), Zurich Government Money
Fund (the "Government Money Fund") and Zurich Tax-Free Money Fund (the "Tax-Free
Money Fund") have adopted certain investment restrictions cannot be changed
without approval by holders of a majority of such Fund's outstanding voting
shares. As defined in the Investment Company Act of 1940, as amended (the "1940
Act") this means the lesser of the vote of (a) 67% of the shares of the Fund
present at a meeting where more than 50% of the outstanding shares of the Fund
are present in person or by proxy; or (b) more than 50% of the outstanding
shares of the Fund.
As a matter of fundamental policy, each Fund may not:
(1) Borrow money, except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time;
(2) Issue senior securities, except as permitted under the Investment
Company Act of 1940, as amended, and as interpreted or modified by
regulatory authority having jurisdiction, from time to time;
(3) Concentrate its investments in a particular industry, as the term is
used in the Investment Company Act of 1940, as amended, and as
interpreted or modified by regulatory authority having jurisdiction,
from time to time;
(4) Engage in the business of underwriting securities issued by others,
except to the extent that the Fund may be deemed to be an underwriter
in connection with the disposition of portfolio securities;
(5) Purchase or sell real estate, which does not include securities of
companies which deal in real estate or mortgages or investments secured
by real estate or interests therein, except that the Fund reserves
freedom of action to hold and to sell real estate acquired as a result
of the Fund's ownership of securities;
(6) Purchase physical commodities or contracts relating to physical
commodities;
(7) Make loans except as permitted under the Investment Company Act of
1940, as amended, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
With regard to restriction #3 of each for the Money Market Fund, for purposes of
determining the percentage of a the Money Market Fund's total assets invested in
securities of issuers having their principal business activities in a particular
industry, asset backed securities will be classified separately, based on the
nature of the underlying assets. Currently, the following categories are used:
captive auto, diversified, retail and consumer loans, captive equipment and
business, business trade receivables, nuclear fuel and capital and mortgage
lending.
The Government Money Fund and the Tax Free Money Fund have no current intention
of making loans as permitted in investment restriction (7) noted above.
If a Fund adheres to a percentage restriction at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Funds did
not borrow money, as permitted by fundamental investment restriction number 1 in
the latest fiscal year; and they have no present intention of borrowing during
the coming year. In any event, borrowings would only be as permitted by such
restriction. The Tax-Free Money Fund may invest more than 25% of its total
assets in industrial development bonds.
2
<PAGE>
The Funds have adopted the following non-fundamental policies restrictions are
non-fundamental, and which may be changed or eliminated for each Fund by is the
Board of Trustees without vote of its shareholder approval:
The Money Market Fund may not:
(1) Purchase common stocks, preferred stocks, warrants, other
equity securities, state bonds, municipal bonds or industrial
revenue bonds (except through the purchase of debt obligations
in accordance with its investment objective and policies);
(2) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the United States Government, its agencies
or instrumentalities) if, as a result, more than 5% of the
value of the Fund's assets would be invested in securities of
that issuer;
(3) Purchase more than 10% of any class of securities of any
issuer. All debt securities and all preferred stocks are each
considered as one class.
(4) Invest more than 5% of the Fund's total assets in securities
of issuers which with their predecessors have a record of less
than three years continuous operation, and equity securities
of issuers which are not readily marketable;
(5) Enter into repurchase agreements if, as a result thereof, more
than 10% of the Fund's total assets valued at the time of the
transaction would be subject to repurchase agreements maturing
in more than seven days;
(6) Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be
necessary for the clearance of transactions;
(7) Write, purchase or sell puts, calls or combinations thereof;
(8) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than1/2of 1% of the securities
of such issuer and together own more than 5% of the securities
of such issuer;
(9) Invest more than 5% of the Fund's total assets in securities
restricted as to disposition under the federal securities laws
(except commercial paper issued under Section 4(2) of the
Securities Act of 1933);
(10) Invest for the purpose of exercising control or management of
another issuer;
(11) Invest in interests in oil, gas or other mineral exploration
or development programs, although it may invest in the
securities of issuers which invest in or sponsor such
programs.
(12) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets.
The Government Money Fund may not:
(1) Purchase securities or make investments other than in
accordance with its investment objective and policies;
(2) Enter into repurchase agreements if, as a result thereof, more
than 10% of the Fund's total assets valued at the time of the
transaction would be subject to repurchase agreements maturing
in more than seven days;
3
<PAGE>
(3) Make short sales of securities, or purchase any securities on
margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions.
The Tax-Free Money Fund may not:
(1) Purchase securities of any issuer (other than obligations of,
or guaranteed by, the U.S. Government, its agencies or
instrumentalities) if as a result more than 5% of the value of
the Fund's assets would be invested in the securities of such
issuer. For purposes of this limitation, the Fund will regard
the entity which has the primary responsibility for the
payment of interest and principal as the issuer;
(2) Invest more than 5% of the Fund's total assets in industrial
development bonds sponsored by companies which with their
predecessors have less than three years' continuous operation;
(3) Make short sales of securities or purchase securities on
margin, except to obtain such short-term credits as may be
necessary for the clearance of transactions.
(4) Write, purchase or sell puts, calls or combinations thereof,
although the Fund may purchaseMunicipal Securities subject to
Standby Commitments in accordance with its investment
objective and policies;
(5) Purchase or retain the securities of any issuer if any of the
officers, trustees or directors of the Trust or its investment
adviser owns beneficially more than1/2of 1% of the securities
of such issuer and together own more than 5% of the securities
of such issuer;
(6) Invest more than 5% of the Fund's total assets in securities
restricted as to disposition under the federal securities laws
(except commercial paper issued under Section 4(2) of the
Securities Act of 1933);
(7) Invest for the purpose of exercising control or management of
another issuer;
(8) Invest in interests in oil, gas or other mineral exploration
or development programs, although it may invest in Municipal
Securities of issuers which invest in or sponsor such
programs;
(9) Purchase securities of other investment companies, except in
connection with a merger, consolidation, reorganization or
acquisition of assets;
OTHER INVESTMENT STRATEGIES AND RISKS
Descriptions in this Statement of Additional Information of a particular
investment practice or technique in which a Fund may engage or a financial
instrument which a Fund may purchase are meant to describe the spectrum of
investments that Scudder Kemper Investments, Inc. (the "Adviser"), in its
discretion, might, but is not required to, use in managing a Fund's assets. The
Adviser may, in its discretion, at any time, employ such practice, technique or
instrument for one or more funds but not for all funds advised by it.
Furthermore, it is possible that certain types of financial instruments or
investment techniques described herein may not be available, permissible,
economically feasible or effective for their intended purposes in all markets.
Certain practices, techniques, or instruments may not be principal activities of
a Fund, but, to the extent employed, could, from time to time, have a material
impact on the Fund's performance.
The Funds described in this Statement of Additional Information seek to maintain
a net asset value of $1.00 per share.
4
<PAGE>
Zurich Money Market Fund
The Money Market Fund seeks maximum current income to the extent consistent with
stability of principal. The Fund pursues its objective by investing exclusively
in the following types of U.S. Dollar denominated money market instruments that
mature in 12 months or less:
o Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities.
o Bank certificates of deposit (including time deposits) or bankers'
acceptances limited to U.S. domestic banks (including their foreign
branches) and Canadian chartered banks having total assets in excess of
$1 billion.
o Bank certificates of deposit, time deposits or bankers' acceptances of
foreign banks (including their U.S. and foreign branches) having total
assets in excess of $10 billion.
o Commercial paper obligations rated A-1 or A-2 by Standard & Poor's
Corporation ("S&P") or Prime-1 or Prime-2 by Moody's Investors Service,
Inc. ("Moody's") or issued by companies with an unsecured debt issue
outstanding currently rated Aa by Moody's or AA by S&P or higher and
investments in other corporate obligations such as publicly traded
bonds, debentures and notes rated Aa by Moody's or AA by S&P or higher.
For a description of these ratings, see "Appendix -- Ratings of
Investments" in the Statement of Additional Information. herein.
o Repurchase agreements of obligations that are suitable for investment
under the categories set forth above. Repurchase agreements are
discussed below.
To the extent the Money Market Fund purchases Eurodollar certificates
of deposit issued by London branches of U.S. banks, or commercial paper issued
by foreign entities, consideration will be given to their marketability, to
possible restrictions on international currency transactions and to regulations
imposed by the domicile country of the foreign issuer. Eurodollar certificates
of deposit are not subject to the same regulatory requirements as certificates
issued by U.S. banks and associated income may be subject to the imposition of
foreign taxes.
The Money Market Fund may invest in commercial paper which is issued by
major corporations without registration under the Securities Act of 1933 in
reliance on the exemption from registration afforded by Section 3(a)(3) thereof.
Such commercial paper may be issued only to finance current transactions and
must mature in nine months or less. Trading of such commercial paper is
conducted primarily by institutional investors through investment dealers, and
individual investor participation in the commercial paper market is very
limited.
The Money Market Fund may also invest in commercial paper issued in
reliance on the so-called "private placement" exemption from registration
afforded by Section 4(2) of the Securities Act of 1933 ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the federal securities
laws, and generally is sold to institutional investors such as the Fund who
agree that they are purchasing the paper for investment and not with a view to
public distribution. Any resale by the purchaser must be in an exempt
transaction. Section 4(2) paper normally is resold to other institutional
investors like the Fund through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. The Fund's investment adviser considers the legally restricted but
readily saleable Section 4(2) paper to be liquid; however, pursuant to
procedures approved by the Board of Trustees of the Trust, if a particular
investment in Section 4(2) paper is not determined to be liquid, that investment
will be included within the 10% limitation on illiquid securities discussed
under "Additional Investment Information About The Funds" below. The Fund's
investment manager adviser monitors the liquidity of its investments in Section
4(2) paper on a continuous basis.
The Money Market Fund may concentrate more than 25% of its assets in
bank certificates of deposit or banker's acceptances of United States banks in
accordance with its investment objective and policies. Accordingly,
5
<PAGE>
the Fund may be more adversely affected by changes in market or economic
conditions and other circumstances affecting the banking industry than it would
be if the Fund's assets were not so concentrated.
Zurich Government Money Fund
The Government Money Fund seeks maximum current income to the extent consistent
with stability of principal. The Fund pursues its objective by investing
exclusively in the following securities that mature within 12 months or less.
o U.S. Treasury bills, notes, bonds and other obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities.
o Repurchase agreements of the obligations described above.
Some securities issued by U.S. Government agencies or instrumentalities
are supported only by the credit of the agency or instrumentality, such as those
issued by the Federal Home Loan Bank, and others have an additional line of
credit with the U.S. Treasury, such as those issued by the Fannie Mae, Farm
Credit System and Student Loan Marketing Association. Short-term U.S. Government
obligations generally are considered to be the safest short-term investment. The
U.S. Government guarantee of the securities owned by the Fund, however, does not
guarantee the net asset value of its shares, which the Fund seeks to maintain at
$1.00 per share. Also, with respect to securities supported only by the credit
of the issuing agency or instrumentality or by an additional line of credit with
the U.S. Treasury, there is no guarantee that the U.S. Government will provide
support to such agencies or instrumentalities and such securities may involve
risk of loss of principal and interest.
Zurich Tax-Free Money Fund
The Tax-Free Money Fund seeks maximum current income that is exempt
from federal income taxes to the extent consistent with stability of principal.
The Fund pursues its objective primarily through a professionally managed,
diversified portfolio of short-term high quality tax-exempt municipal
obligations.
Under normal market conditions at least 80% of the Fund's total assets
will, as a fundamental policy, be invested in obligations issued by or on behalf
of states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies and instrumentalities, the
income from which is exempt from federal income tax ("Municipal Securities"). In
compliance with the position of the staff of the Securities and Exchange
Commission, the Fund does not consider "private activity" bonds as described in
"Dividends and Taxes -- Tax-Free Money Fund" as Municipal Securities for
purposes of the 80% limitation. This is a fundamental policy so long as the
staff maintains its position, after which it would become non-fundamental.
Dividends representing net interest income received by the Tax-Free
Money Fund on Municipal Securities will be exempt from federal income tax when
distributed to the Fund's shareholders. Such dividend income may be subject to
state and local taxes. See "Dividends and Taxes -- Tax-Free Money Fund." The
Fund's assets will generally consist of Municipal Securities, temporary
investments as described below and cash. The Fund considers short-term Municipal
Securities to be those that mature in 12 months or less.
The Tax-Free Money Fund will invest only in Municipal Securities which at the
time of purchase:
o are rated within the two highest ratings for Municipal Securities (Aaa
or Aa) assigned by Moody's, (AAA or AA) assigned by S&P, (AAA or AA)
assigned by Fitch, or (AAA or AA) assigned by Duff, or any other
nationally recognized statistical rating organization ("NRSRO") as
determined by the Securities and Exchange Commission are rated within
the two highest ratings for Municipal Securities (Aaa or Aa) assigned
by Moody's or (AAA or AA) assigned by S&P;
o are guaranteed or insured by the U.S. Government as to the payment of
principal and interest;
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o are fully collateralized by an escrow of U.S. Government securities
acceptable to the Fund's investment manager; Adviser:
o have at the time of purchase a Moody's short-term municipal securities
rating of MIG-2 or higher or a municipal commercial paper rating of P-2
or higher, or S&P's municipal commercial paper rating of A-2 or higher,
or Fitch's municipal commercial paper rating of F-2 or higher, or
Duff's municipal commercial paper rating of Duff-2 or higher, or a
rating within the two highest categories of any other NRSRO as
determined by the Securities and Exchange Commission;
o are unrated, if longer term Municipal Securities of that issuer are
rated within the two highest rating categories by Moody's, S&P, Fitch,
Duff or any other NRSRO as determined by the Securities and Exchange
Commission; are unrated, if longer term Municipal Securities of that
issuer are rated within the two highest rating categories by Moody's or
S&P; or
o are determined to be at least equal in quality to one or more of the
above ratings in the discretion of the Fund's investment Adviser.
Municipal Securities generally are classified as "general obligation"
or "revenue" issues. General obligation bonds are secured by the issuer's pledge
of its full credit and taxing power for the payment of principal and interest.
Revenue bonds are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source such as the user of the
facility being financed. Industrial development bonds held by the Fund are in
most cases revenue bonds and are not payable from the unrestricted revenues of
the issuer. Among other types of instruments, the Fund may purchase tax-exempt
commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. A more detailed
discussion of Municipal Securities and the Moody's and S&P ratings outlined
above is contained in the Statement of Additional Information. As indicated
above and under "Dividends and Taxes -- Tax-Free Money Fund," the Fund may
invest in "private activity" bonds.
The Tax-Free Money Fund may purchase securities which provide for the
right to resell them to an issuer, bank or dealer at an agreed upon price or
yield within a specified period prior to the maturity date of such securities.
Such a right to resell is referred to as a "Standby Commitment." Securities may
cost more with Standby Commitments than without them. Standby Commitments will
be entered into solely to facilitate portfolio liquidity. A Standby Commitment
may be exercised before the maturity date of the related Municipal Security if
the Fund's investment manager adviser revises its evaluation of the
creditworthiness of the underlying security or of the entity issuing the Standby
Commitment. The Fund's policy is to enter into Standby Commitments only with
issuers, banks or dealers that are determined by the Fund's investment manager
adviser to present minimal credit risks. If an issuer, bank or dealer should
default on its obligation to repurchase an underlying security, the Fund might
be unable to recover all or a portion of any loss sustained from having to sell
the security elsewhere. For purposes of valuing the Fund's securities at
amortized cost, the stated maturity of Municipal Securities subject to Standby
Commitments is not changed.
The Tax-Free Money Fund may purchase high quality Certificates of
Participation in trusts that hold Municipal Securities. A Certificate of
Participation gives the Fund an undivided interest in the Municipal Security in
the proportion that the Fund's interest bears to the total principal amount of
the Municipal Security. These Certificates of Participation may be variable rate
or fixed rate with remaining maturities of one year or less. A Certificate of
Participation may be backed by an irrevocable letter of credit or guarantee of a
financial institution that satisfies rating agencies as to the credit quality of
the Municipal Security supporting the payment of principal and interest on the
Certificate of Participation. Payments of principal and interest would be
dependent upon the underlying Municipal Security and may be guaranteed under a
letter of credit to the extent of such credit. The quality rating by a rating
service of an issue of Certificates of Participation is based primarily upon the
rating of the Municipal Security held by the trust and the credit rating of the
issuer of any letter of credit and of any other guarantor providing credit
support to the issue. The Fund's investment manager adviser considers these
factors as
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well as others, such as any quality ratings issued by the rating services
identified above, in reviewing the credit risk presented by a Certificate of
Participation and in determining whether the Certificate of Participation is
appropriate for investment by the Fund. It is anticipated by the Fund's
investment manager adviser that, for most publicly offered Certificates of
Participation, there will be a liquid secondary market or there may be demand
features enabling the Fund to readily sell its Certificates of Participation
prior to maturity to the issuer or a third party. As to those instruments with
demand features, the Fund intends to exercise its right to demand payment from
the issuer of the demand feature only upon a default under the terms of the
Municipal Security, as needed to provide liquidity to meet redemptions, or to
maintain a high quality investment portfolio.
The Tax-Free Money Fund may purchase and sell Municipal Securities on a
when-issued or delayed delivery basis. A when-issued or delayed delivery
transaction arises when securities are bought or sold for future payment and
delivery to secure what is considered to be an advantageous price and yield to
the Fund at the time it enters into the transaction. In determining the maturity
of portfolio securities purchased on a when-issued or delayed delivery basis,
the Fund will consider them to have been purchased on the date when it committed
itself to the purchase.
A security purchased on a when-issued basis, like all securities held
by the Tax-Free Money Fund, is subject to changes in market value based upon
changes in the level of interest rates and investors' perceptions of the
creditworthiness of the issuer. Generally such securities will appreciate in
value when interest rates decline and decrease in value when interest rates
rise. Therefore if, in order to achieve higher interest income, the Fund remains
substantially fully invested at the same time that it has purchased securities
on a when-issued basis, there will be a greater possibility that the market
value of the Fund's assets will vary from $1.00 per share, since the value of a
when-issued security is subject to market fluctuation and no interest accrues to
the purchaser prior to settlement of the transaction. See "Net Asset Value --
Determining Share Price."
The Fund will only make commitments to purchase Municipal Securities on
a when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Fund reserves the right to sell these securities before
the settlement date if deemed advisable. The sale of these securities may result
in the realization of gains that are not exempt from federal income tax.
In seeking to achieve its investment objective, the Tax-Free Money Fund
may invest all or any part of its assets in Municipal Securities that are
industrial development bonds. Moreover, although the Fund does not currently
intend to do so on a regular basis, it may invest more than 25% of its assets in
Municipal Securities that are repayable out of revenue streams generated from
economically related projects or facilities, if such investment is deemed
necessary or appropriate by the Fund's investment adviser. To the extent that
the Fund's assets are concentrated in Municipal Securities payable from revenues
on economically related projects and facilities, the Fund will be subject to the
risks presented by such projects to a greater extent than it would be if the
Fund's assets were not so concentrated.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Tax-Free Money Fund may invest in
taxable "temporary investments" which include:
o obligations of the U.S. Government, its agencies or instrumentalities;
o debt securities rated within the two highest grades by Moody's or S&P;
o commercial paper rated in the two highest grades by either of such
rating services;
o certificates of deposit of domestic banks with assets of $1 billion or
more; and
o any of the foregoing temporary investments subject to repurchase
agreements of the obligaions described above (Repurchase agreements are
discussed below).
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Interest income from temporary investments is taxable to shareholders as
ordinary income. Although the Fund is permitted to invest in taxable securities,
it is the Fund's primary intention to generate income dividends that are not
subject to federal income taxes. See "Dividends and Taxes." For a description of
the ratings, see "Appendix -- Ratings of Investments."
Municipal Securities which that the Tax-Free Money Fund may purchase include,
without limitation, debt obligations issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as airports, bridges, highways, housing, hospitals, mass transportation, public
utilities, schools, streets, and water and sewer works. Other public purposes
for which Municipal Securities may be issued include refunding outstanding
obligations, obtaining funds for general operating expenses and obtaining funds
to loan to other public institutions and facilities.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although current
federal tax laws place substantial limitations on the size of such issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
full credit and taxing power for the payment of principal and interest. Revenue
notes are payable only from the revenues derived from a particular facility or
class of facilities or, in some cases, from the proceeds of a special excise or
other specific revenue source. Industrial development bonds which are Municipal
Securities are in most cases revenue bonds and generally do not constitute the
pledge of the credit of the issuer of such bonds.
Examples of Municipal Securities that are issued with original maturities of one
year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds, warrants and tax-free commercial paper.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds which are
not yet refundable, but for which securities have been placed in escrow to
refund an original municipal bond issue when it becomes refundable. Tax-free
commercial paper is an unsecured promissory obligation issued or guaranteed by a
municipal issuer. The Tax-Free Money Fund may purchase other Municipal
Securities similar to the foregoing, which are or may become available,
including securities issued to pre-refund other outstanding obligations of
municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material adverse changes in the
rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states, and legislation has been introduced to effect changes in public school
finances in some states. In other instances there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or federal law which ultimately could affect the
validity of those Municipal Securities or the tax-free nature of the interest
thereon.
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Additional Investment Information About the Funds
In addition to the specific investment objective and policies listed above, each
Fund limits its investments to securities that meet the requirements of Rule
2a-7 under the Investment Company Act of 1940 (the "1940 Act"). See "Net Asset
Value -- Determining Share Price."
Each Fund may invest in instruments that have interest rates that adjust
periodically or that "float" continuously according to formulae intended to
minimize fluctuation in values of the instruments ("Variable Rate Securities").
The interest rate on a Variable Rate Security is ordinarily determined by
reference to or is a percentage of an objective standard such as a bank's prime
rate, the 90-day U.S. Treasury bill rate, or the rate of return on commercial
paper or bank certificates of deposit. Generally, the changes in the interest
rate on Variable Rate Securities reduce the fluctuation in the market value of
such securities. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than for fixed-rate
obligations. Some Variable Rate Securities ("Variable Rate Demand Securities")
have a demand feature entitling the purchaser to resell the securities at an
amount approximately equal to amortized cost or the principal amount thereof
plus accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. Each Fund determines the maturity of Variable Rate Securities in
accordance with Securities and Exchange Commission rules which allow the Fund to
consider certain of such instruments as having maturities shorter than the
maturity date on the face of the instrument.
Each Fund may invest in repurchase agreements, which are instruments under which
a Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which price
is higher than the purchase price), thereby determining the yield during the
Fund's holding period. Maturity of the securities subject to repurchase may
exceed one year. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, a Fund might incur expenses in enforcing its rights, and
could experience losses, including a decline in the value of the underlying
securities and loss of income.
A security purchased on a when-issued basis, like all securities held by the
Funds, is subject to changes in market value based upon changes in the level of
interest rates and investors' perceptions of the creditworthiness of the issuer.
Generally such securities will appreciate in value when interest rates decline
and decrease in value when interest rates rise. Therefore if, in order to
achieve higher interest income, a Fund remains substantially fully invested at
the same time that it has purchased securities on a when-issued basis, there
will be a greater possibility that the market value of the Fund's assets will
vary from $1.00 per share, since the value of a when-issued security is subject
to market fluctuation and no interest accrues to the purchaser prior to
settlement of the transaction. See "Determining Share Price."
The Funds will only make commitments to purchase securities on a when-issued or
delayed delivery basis with the intention of actually acquiring the securities,
but the Funds reserve the right to sell these securities before the settlement
date if deemed advisable. The sale of these securities may result in the
realization of gains that are not exempt from federal income tax.
Each Fund may invest in instruments that have interest rates that adjust
periodically or that "float" continuously according to formulae intended to
minimize fluctuation in values of the instruments ("Variable Rate Securities").
The interest rate on a Variable Rate Security is ordinarily determined by
reference to or is a percentage of an objective standard such as a bank's prime
rate, the 90-day U.S. Treasury bill rate, or the rate of return on commercial
paper or bank certificates of deposit. Generally, the changes in the interest
rate on Variable Rate Securities reduce the fluctuation in the market value of
such securities. Accordingly, as interest rates decrease or increase, the
potential for capital appreciation or depreciation is less than for fixed-rate
obligations. Some Variable Rate Securities ("Variable Rate Demand Securities")
have a demand feature entitling the purchaser to resell the securities at an
amount approximately equal to amortized cost or the principal amount thereof
plus accrued interest. As is the case for other Variable Rate Securities, the
interest rate on Variable Rate Demand Securities varies according to some
objective standard intended to minimize fluctuation in the values of the
instruments. Each Fund determines the maturity of Variable Rate Securities in
accordance with Securities and Exchange Commission rules
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which allow the Fund to consider certain of such instruments as having
maturities shorter than the maturity date on the face of the instrument.
Each Fund may invest in repurchase agreements, which are instruments under which
a Fund acquires ownership of a security from a broker-dealer or bank that agrees
to repurchase the security at a mutually agreed upon time and price (which price
is higher than the purchase price), thereby determining the yield during the
Fund's holding period. Maturity of the securities subject to repurchase may
exceed 12 months. In the event of a bankruptcy or other default of a seller of a
repurchase agreement, a Fund might incur expenses in enforcing its rights, and
could experience losses, including a decline in the value of the underlying
securities and loss of income.
A Fund will not purchase illiquid securities, including time deposits and
repurchase agreements maturing in more than seven days, if, as a result thereof,
more than 10% of such Fund's net assets valued at the time of the transaction
would be invested in such securities. If a Fund holds a material percentage of
its assets in illiquid securities, there may be a question concerning the
ability of such Fund to make payment within seven days of the date its shares
are tendered for redemption. Securities and Exchange Commission guidelines
provide that the usual limit on aggregate holdings by a money market fund of
illiquid assets is 10% of its net assets. Each Fund's investment adviser
monitors holdings of illiquid securities on an ongoing basis and will take such
action as it deems appropriate to help maintain adequate liquidity.
A Fund may not borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. Any such borrowings under this provision will
not be collateralized. If for any reason the current value of the Fund's total
assets falls below an amount equal to three times the amount of its indebtedness
from money borrowed, the Fund will, within three business days, reduce its
indebtedness to the extent necessary. No Fund will borrow for leverage purposes.
INVESTMENT ADVISER
Investment Adviser. Scudder Kemper Investments, Inc. ("Scudder Kemper" or "the
Adviser"), 345 Park Avenue, New York, New York is the Funds' investment adviser.
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 an investment
management agreement, 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 the Trust if elected to such positions. The Trust pays
the expenses of its operations, including the fees and expenses of independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, costs of calculating net
asset value and maintaining all accounting records thereto, brokerage
commissions or transaction costs, taxes, registration fees, the fees and
expenses of qualifying the Fund and its shares for distribution under federal
and state securities laws and membership dues in the Investment Company
Institute or any similar organization. Trust expenses generally are allocated
among the Funds on the basis of relative net assets at the time of allocation,
except that expenses directly attributable to a particular Fund are charged to
that Fund.
The investment management agreement provides that Scudder Kemper shall not be
liable for any error of judgment or of law, or for any loss suffered by the
Funds in connection with the matters to which the agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of Scudder Kemper in the performance of its obligations and duties, or by
reason of its reckless disregard of its obligations and duties under the
agreement.
The investment management agreement continues in effect from year to year for
each Fund 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 Trust and
(b) by the shareholders of each Fund or the Board of Trustees. If continuation
is not approved for a Fund, the investment management agreement nevertheless may
continue in effect for the Funds for which it is approved and Scudder Kemper may
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<PAGE>
continue to serve as investment adviser for the Fund for which it is not
approved to the extent permitted by the Investment Company Act of 1940. The
agreement may be terminated at any time upon 60 days notice by either party, or
by a majority vote of the outstanding shares of a Fund with respect to that
Fund, and will terminate automatically upon assignment. Shareholders of each
Fund will vote separately upon continuation of the investment management
agreement and upon other matters affecting only an individual Fund. Additional
Funds may be subject to a different agreement.
On September 7, 1998, Zurich Insurance Company ("Zurich") the majority owner of
the Adviser, entered into an agreement with B.A.T. Industries p.l.c. ("B.A.T."),
pursuant to which the financial services business of B.A.T. were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, each Fund's investment management agreement with the Adviser was
deemed to have been assigned and, therefore, terminated. The Board of Trustees
of each Fund and the shareholders of each Fund have approved a new investment
management agreement with the Adviser, which is substantially identical to the
former investment management agreement, except for the dates of execution and
termination.
For the services and facilities furnished, the Trust pays an annual investment
management fee, payable monthly, on a graduated basis of .50% of the first $215
million of average daily net assets of the Trust, 0.375% on the next $335
million, 0.30% on the next $250 million and 0.25% of average daily net assets of
the Trust over $800 million. Scudder Kemper has agreed to reimburse the Trust
should all operating expenses of the Trust, including the investment management
fee of Scudder Kemper but excluding taxes, interest, extraordinary expenses and
brokerage commissions or transaction costs, exceed 1 1/2% of the first $30
million of average net assets of the Trust and 1% of average net assets over $30
million on an annual basis. The investment management fee and the expense
limitation are computed based upon the combined average daily net assets of the
Funds and are allocated among such Funds based upon the relative net assets of
each Fund. For its services as investment adviser and manager and for facilities
furnished during the fiscal years ended July 31 indicated, the Funds incurred
investment management fees as shown.
Fund 1999 1998 1997
---- ---- ---- ----
Money Market $12,086,000 $11,666,000
Government Money $ 1,815,000 $ 1,894,000
Tax-Free Money $ 2,156,000 $ 2,068,000
Fund Accounting Agent. Scudder Fund Accounting Corporation ("SFAC"),Two
International Place, Boston, Massachusetts 02110, a subsidiary of the Adviser,
is responsible for determining the daily net asset value per share of the Fund
and maintaining all accounting records related thereto. Currently, SFAC receives
no fee for its services to the Fund; however, subject to Board approval, at some
time in the future, SFAC may seek payment for its services under this agreement.
Principal Underwriter. Kemper Distributors, Inc. ("KDI"), an affiliate of
Scudder Kemper, is the principal underwriter for shares of the Funds and acts as
agent of the Funds in the sale of their shares. The Funds pay the cost for the
prospectus and shareholder reports to be set in type and printed for existing
shareholders, and KDI pays for the printing and distribution of copies thereof
used in connection with the offering of shares to prospective investors. KDI
also pays for supplementary sales literature and advertising costs. Terms of
continuation, termination and assignment under the underwriting agreement are
identical to those described above with regard to the investment management
agreement, except that termination other than upon assignment requires six
months notice and shares are voted in the aggregate and not by Fund whenever
shareholders vote with respect to such agreement. KDI receives o compensation
from the Funds as principal underwriter for the Funds' shares and pays all
expenses of distribution of the Funds' shares
Certain officers or trustees of the Trust are also directors or officers of
Scudder Kemper and KDI as indicated under "Officers and Trustees."
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Custodian, Transfer Agent and Shareholder Service Agent. State Street Bank and
Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts
02110, as custodian, has custody of all securities and cash of the Funds. State
Street attends to the collection of principal and income, and payment for and
collection of proceeds bought and sold by the Funds. . Pursuant to a services
agreement with Investors Fiduciary Trust Company ("IFTC"), 801 Pennsylvania
Avenue, Kansas City, Missouri 64105, Kemper Service Company ("KSvC"), an
affiliate of the Adviser, serves as "Shareholder Service Agent." IFTC receives,
as transfer agent, and pays to KSvC annual account fees of a maximum of $8 per
account plus out-of-pocket expense reimbursement. Effective January 1, 1999,
this schedule was amended to include a $10 annual account fee, a $5 new account
set up fee, an annual asset based fee of 0.06% of average daily net assets and
out-of-pocket expense reimbursement. During the fiscal year ended July 31, 1999,
IFTC remitted shareholder service fees for Money Market Fund in the amount of
$___________, for Government Money Fund in the amount of $_______, and for Muni
Money Fund in the amount of $________ to KSvC as Shareholder Service Agent.
Independent Auditors and Reports to Shareholders. The Funds' independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Funds' annual financial statements, review certain
regulatory reports and the Funds' federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Funds. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
LEGAL COUNSEL. Vedder, Price, Kaufman & Kammholz, 222 North LaSalle Street,
Chicago, Illinois 60601, serves as legal counsel to the Fund.
PORTFOLIO TRANSACTIONS
Brokerage
Allocation of brokerage is supervised by the Adviser.
Portfolio transactions are undertaken principally to pursue the objective of
each Fund in relation to movements in the general level of interest rates, to
invest money obtained from the sale of Fund shares, to reinvest proceeds from
maturing portfolio securities and to meet redemptions of Fund shares. This may
increase or decrease the yield of a Fund depending upon management's ability to
correctly time and execute such transactions. Since a Fund's assets are invested
in securities with short maturities, its portfolio will turn over several times
a year. Securities with maturities of less than one year are excluded from
required portfolio turnover rate calculations, so each Fund's portfolio turnover
rate for reporting purposes is zero.
The primary objective of the Adviser in placing orders for the purchase and sale
of securities for a Fund's portfolio is to obtain the most favorable net results
taking into account such factors as price, commission where applicable, size of
order, difficulty of execution and skill required of the executing
broker/dealer. The Adviser seeks to evaluate the overall reasonableness of
brokerage commissions paid (to the extent applicable) through SIS's familiarity
with commissions charged on comparable transactions, as well as by comparing
commissions paid by a Fund to reported commissions paid by others. The Adviser
reviews on a routine basis commission rates, execution and settlement services
performed, making internal and external comparisons.
When it can be done consistently with the policy of obtaining the most favorable
net results, it is the Adviser's practice to place such orders with
broker/dealers who supply research, market and statistical information to a
Fund. The term "research, market and statistical information" includes advice as
to the value of securities; the advisability of investing in, purchasing or
selling securities; the availability of securities or purchasers or sellers of
securities; and analyses and reports concerning issuers, industries, securities,
economic factors and trends, portfolio strategy and the performance of accounts.
The Adviser is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission in excess of that which another broker might charge for
executing the same transaction solely on account of receipt of the research,
market or statistical information. In effecting transactions in over-the-
counter securities, orders are placed with the principal market makers for the
security being traded unless, after exercising care, it appears that more
favorable results are available elsewhere.
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In selecting among firms believed to meet the criteria for handling a particular
transaction, the Adviser may give consideration to those firms that have sold or
are selling shares of a Fund managed by the Adviser.
To the maximum extent feasible, it is expected that the Adviser will place
orders for a portfolio transactions through SIS, a corporation registered as a
broker-dealer and a subsidiary of the Adviser. SIS will place orders on behalf
of a Fund with issuers, underwriters or other brokers and dealers. SIS will not
receive any commission, fee or other remuneration from a Fund for this service.
Although certain research, market and statistical information from
broker/dealers may be useful to a Fund and to the Adviser, it is the opinion of
the Adviser that such information only supplements its own research effort since
the information must still be analyzed, weighed and reviewed by the Adviser's
staff. Such information may be useful to the Adviser in providing services to
clients other than the Fund and not all such information is used by the Adviser
in connection with the Fund. Conversely, such information provided to the
Adviser by broker/dealers through whom other clients of the Adviser effect
securities transactions may be useful to the Adviser in providing services to a
Fund.
The trustees review from time to time whether the recapture for the benefit of a
Fund of some portion of the brokerage commissions or similar fees paid by a Fund
on portfolio transaction is legally permissible and advisable.
Money market instruments are normally purchased in principal transactions
directly from the issuer or from an underwriter or market maker. There usually
are no brokerage commissions paid by the Funds for such purchases. During the
last three fiscal years the Funds paid no portfolio brokerage commissions.
Purchases from underwriters will include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market makers
will include the spread between the bid and asked prices.
14
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
Purchase of Shares
Shares of each Fund are sold at their net asset value next determined after an
order and payment are received in the form described in the Funds' prospectus.
There is no sales charge. The minimum initial investment in any Fund is $1,000
($250 for IRAs) and the minimum subsequent investment is $100 ($50 for IRAs) but
such minimum amounts may be changed at any time. See the prospectus for certain
exceptions to these minimums. The Funds may waive the minimum for purchases by
trustees, directors, officers or employees of the Trust or Scudder Kemper and
its affiliates and the $3 monthly fee assessed on accounts below $1,000. Since
each Fund will be investing in instruments that normally require immediate
payment in Federal Funds (monies credited to a bank's account with its regional
Federal Reserve Bank), each Fund has adopted procedures for the convenience of
its shareholders and to ensure that each Fund receives investable funds. An
order for the purchase of shares that is accompanied by a check drawn on a
foreign bank (other than a check drawn on a Canadian bank in U.S. Dollars) will
not be considered in proper form and will not be processed unless and until the
Fund determines that it has received payment of the proceeds of the check. The
time required for such a determination will vary and cannot be determined in
advance.
Orders for purchase of shares of a Fund received by wire transfer in the form of
Federal Funds will be effected at the next determined net asset value. Shares
purchased by wire will receive (i) that day's dividend if effected at or prior
to the 1:00 p.m. Central time net asset value determination for the Money Market
Fund and the Government Money Fund and at or prior to the 11:00 a.m. Central
time net asset value determination for the Tax-Free Money Fund otherwise the
dividend for the next business day if effected at the 3:00 p.m. Central time net
asset value determination.
Orders for purchase accompanied by a check or other negotiable bank draft will
be accepted and effected as of 3:00 p.m. Central time on the next business day
following receipt and such shares will receive the dividend for the next
calendar day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before shares will be purchased.
If payment is wired in Federal Funds, the payment should be directed to Zurich
Money Funds: United Missouri Bank of Kansas City, N.A. (ABA #1010-0069-5) Zurich
Money Market Fund: 98-0103-346-8, or Zurich Government Money Fund: 98-0116-259-4
or, Zurich Tax-Free Money Fund:98-0001-577-6
Redemption of Shares
Upon receipt by the Shareholder Service Agent of a request for redemption in
proper form, shares will be redeemed by a Fund at the applicable net asset value
as described in the Funds' prospectus. If processed at 3:00 p.m. Central time,
the shareholders will receive that day's dividend. A shareholder may elect to
use either the regular or expedited redemption procedures. Shareholders who
redeem shares of a Fund will receive the net asset value of such shares and all
declared but unpaid dividends on such shares.
The Funds may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of a Fund's investments is
not reasonably practicable, or (ii) it is not reasonably practicable for 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
the Funds' shareholders.
Although it is each Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Trust will pay
the redemption price in part by a distribution of portfolio securities in lieu
of cash, in conformity with the applicable rules of the Securities and Exchange
Commission, taking such securities at the same value used to
15
<PAGE>
determine net asset value, and selecting the securities in such manner as the
Board of Trustees may deem fair and equitable. If such a distribution occurs,
shareholders receiving securities and selling them could receive less than the
redemption value of such securities and in addition could incur certain
transaction costs. Such a redemption would not be as liquid as a redemption
entirely in cash. The Trust has elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Trust is obligated to redeem shares of a Fund
solely in cash up to the lesser of $250,000 or 1% of the net assets of the Fund
during any 90-day period for any one shareholder of record.
Regular Redemptions. When shares are held for the account of a shareholder by
the Trust's transfer agent, the shareholder may redeem them by sending a written
request with signatures guaranteed to Kemper Service Company, P.O. Box 419153,
Kansas City, Missouri 64141-6153. When certificates for shares have been issued,
they must be mailed to or deposited with the Shareholder Service Agent, along
with a duly endorsed stock power and accompanied by a written request for
redemption. Redemption requests and a stock power must be endorsed by the
account holder with signatures guaranteed by a commercial bank, trust company,
savings and loan association, federal savings bank, member firm of a national
securities exchange or other eligible financial institution. The redemption
request and stock power must be signed exactly as the account is registered
including any special capacity of the registered owner. Additional documentation
may be requested, and a signature guarantee is normally required, from
institutional and fiduciary account holders, such as corporations, custodians
(e.g., under the Uniform Transfers to Minors Act), executors, administrators,
trustees or guardians.
Telephone Redemptions. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor, guardian and custodian account
holders, provided the trustee, executor guardian or custodian is named in the
account registration. Other institutional account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders and subject to the limitations on liability, provided that this
privilege has been pre-authorized by the institutional account holder or
guardian account holder by written instruction to the Shareholder Service Agent
with signatures guaranteed. Shares purchased by check or through certain ACH
transactions may not be redeemed under this privilege of redeeming shares by
telephone request until such shares have been owned for at least 10 days. This
privilege of redeeming shares by telephone request or by written request without
a signature guarantee may not be used to redeem shares held in certificate form
and may not be used if the shareholder's account has had an address change
within 30 days of the redemption request. During periods when it is difficult to
contact the Shareholder Service Agent by telephone, it may be difficult to use
the telephone redemption privilege, although investors can still redeem by mail.
Each Portfolio reserves the right to terminate or modify this privilege at any
time.
Expedited Wire Transfer Redemptions. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares can be redeemed and proceeds sent by a federal wire
transfer to a single previously designated account. Requests received by the
Shareholder Service Agent prior to 11:00 a.m. Central time will result in shares
being redeemed that day and normally the proceeds will be sent to the designated
account that day. Once authorization is on file, the Shareholder Service Agent
will honor requests by telephone at 1-800-231-8568 or in writing, subject to the
limitations on liability. A Portfolio is not responsible for the efficiency of
the federal wire system or the account holder's financial services firm or bank.
Each Portfolio currently does not charge the account holder for wire transfers.
The account holder is responsible for any charges imposed by the account
holder's firm or bank. There is a $1,000 wire redemption minimum. To change the
designated account to receive wire redemption proceeds, send a written request
to the Shareholder Service Agent with signatures guaranteed as described above,
or contact the firm through which shares of a Portfolio were purchased. Shares
purchased by check or through certain ACH transactions may not be redeemed by
wire transfer until the shares have been owned for at least 10 days. Account
holders may not use this procedure to redeem shares held in certificate form.
During periods when it is difficult to contact the Shareholder Service Agent by
telephone, it may be difficult to use the expedited wire transfer redemption
privilege. Each Portfolio reserves the right to terminate or modify this
privilege at any time.
16
<PAGE>
Redemptions By Draft. Upon request, shareholders will be provided with drafts to
be drawn on a Portfolio ("Redemption Checks"). These Redemption Checks may be
made payable to the order of any person for not more than $5 million.
Shareholders should not write Redemption Checks in an amount less than $1,000
since a $10 service fee will be charged as described below. When a Redemption
Check is presented for payment, a sufficient number of full and fractional
shares in the shareholder's account will be redeemed as of the next determined
net asset value to cover the amount of the Redemption Check. This will enable
the shareholder to continue earning dividends until a Fund receives the
Redemption Check. A shareholder wishing to use this method of redemption must
complete and file an Account Application which is available from each Fund or
firms through which shares were purchased. Redemption Checks should not be used
to close an account since the account normally includes accrued but unpaid
dividends. Each Fund reserves the right to terminate or modify this privilege at
any time. This privilege may not be available through some firms that distribute
shares of each Fund. In addition, firms may impose minimum balance requirements
in order to offer this feature. Firms may also impose fees to investors for this
privilege or establish variations of minimum check amounts if approved by each
Fund.
Unless one signer is authorized on the Account Application, Redemption Checks
must be signed by all account holders. Any change in the signature authorization
must be made by written notice to the Shareholder Service Agent. Shares
purchased by check or through certain ACH transactions may not be redeemed by
Redemption Check until the shares have been on a Portfolio's books for at least
10 days. Shareholders may not use this procedure to redeem shares held in
certificate form. Each Fund reserves the right to terminate or modify this
privilege at any time.
A Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Portfolio shares in excess of the value of a Fund account or in an amount less
than $1,000; when a Redemption Check is presented that would require redemption
of shares that were purchased by check or certain ACH transactions within 10
days; or when "stop payment" of a Redemption Check is requested.
Special Features. Certain firms that offer Shares of a Fund also provide special
redemption features through charge or debit cards and checks that redeem Fund
Shares. Various firms have different charges for their services. Shareholders
should obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and special rules of
the cash management program being offered.
DIVIDENDS, NET ASSET VALUE AND TAXES
Dividends. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares of the same Fund unless they elect to
receive cash. Dividends will be reinvested monthly at the net asset value
normally on the 25th of each month if a business day, otherwise on the prior
business day. The Funds will pay shareholders who redeem their entire accounts
all unpaid dividends at the time of redemption not later than the next dividend
payment date.
Each Fund calculates its dividends based on its daily net investment income. For
this purpose, the net investment income of a Fund consists of (a) accrued
interest income plus or minus amortized discount or premium (excluding market
discount for the Tax-Free Money Fund), (b) plus or minus all short-term realized
gains and losses on portfolio assets and (c) minus accrued expenses allocated to
the Fund. Expenses of the Funds are accrued each day. While each Fund's
investments are valued at amortized cost, there will be no unrealized gains or
losses on portfolio securities. However, should the net asset value of a Fund
deviate significantly from market value, the Board of Trustees could decide to
value the portfolio securities at market value and then unrealized gains and
losses would be included in net investment income above.
Net Asset Value. As described in the prospectus, each Fund values its portfolio
instruments at amortized cost, which does not take into account unrealized
capital gains or losses. This involves initially valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
Calculations are made to compare the value of a Fund's
17
<PAGE>
investments valued at amortized cost with market values. Market valuations are
obtained by using actual quotations provided by market makers, estimates of
market value, or values obtained from yield data relating to classes of money
market instruments published by reputable sources at the mean between the bid
and asked prices for the instruments. If a deviation of of 1% or more were to
occur between the net asset value per share calculated by reference to market
values and a Fund's $1.00 per share net asset value, or if there were any other
deviation that the Board of Trustees of the Trust believed would result in a
material dilution to shareholders or purchasers, the Board of Trustees would
promptly consider what action, if any, should be initiated. If a Fund's net
asset value per share (computed using market values) declined, or were expected
to decline, below $1.00 (computed using amortized cost), the Board of Trustees
of the Trust might temporarily reduce or suspend dividend payments in an effort
to maintain the net asset value at $1.00 per share. As a result of such
reduction or suspension of dividends or other action by the Board of Trustees,
an investor would receive less income during a given period than if such a
reduction or suspension had not taken place. Such action could result in
investors receiving no dividends for the period during which they held shares
and receiving, upon redemption, a price per share lower than that which they
paid. On the other hand, if a Fund's net asset value per share (computed using
market values) were to increase, or were anticipated to increase, above $1.00
(computed using amortized cost), the Board of Trustees of the Trust might
supplement dividends in an effort to maintain the net asset value at $1.00 per
share.
Taxes. Taxable Portfolios. The Money Fund and the Government Fund each intend to
continue to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code (the "Code") and, if so qualified, will not be subject to
Federal income taxes to the extent its earnings are distributed. Dividends
derived from interest and short-term capital gains are taxable as ordinary
income whether received in cash or reinvested in additional shares. Long-term
capital gains distributions, if any, are taxable as long-term capital gains
regardless of the length of time shareholders have owned their shares. Dividends
from these Portfolios do not qualify for the dividends received deduction
available to corporate shareholders.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
Federal income tax purposes. The Portfolio may adjust its schedule for dividend
reinvestment for the month of December to assist in complying with the reporting
and minimum distribution requirements contained in the Code.
Tax-Free Money Fund intends to continue to qualify under the Code as a regulated
investment company and, if so qualified, will not be liable for Federal income
taxes to the extent its earnings are distributed. This Portfolio also intends to
meet the requirements of the Code applicable to regulated investment companies
distributing tax-exempt interest dividends and, accordingly, dividends
representing net interest received on Municipal Securities will not be included
by shareholders in their gross income for Federal income tax purposes, except to
the extent such interest is subject to the alternative minimum tax as discussed
below. Dividends representing taxable net investment income (such as net
interest income from temporary investments in obligations of the U.S.
Government) and net short-term capital gains, if any, are taxable to
shareholders as ordinary income. Net interest on certain "private activity
bonds" issued on or after August 8,1986 is treated as an item of tax preference
and may, therefore, be subject to both the individual and corporate alternative
minimum tax. To the extent provided by regulations to be issued by the Secretary
of the Treasury, exempt-interest dividends from the Tax-Free Money are to be
treated as interest on private activity bonds in proportion to the interest
income the Fund receives from private activity bonds, reduced by allowable
deductions. For the 1998 calendar year 19% of the net interest income was
derived from "private activity bonds. "
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax-preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a
tax-preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their Federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the Tax-Free Money Fund.
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<PAGE>
Individuals whose modified income exceeds a base amount will be subject to
Federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from the Tax-Free Money Fund, and 50% of Social
Security benefits.
The tax exemption of dividends from the Tax-Free Money Fund for Federal income
tax purposes does not necessarily result in exemption under the income or other
tax laws of any state or local taxing authority. The laws of the several states
and local taxing authorities vary with respect to the taxation of such income
and shareholders of the Fund are advised to consult their own tax advisers as to
the status of their accounts under state and local tax laws.
Each Fund is required by law to withhold 31% of taxable dividends paid to
certain shareholders who do not furnish a correct taxpayer identification number
(in the case of individuals, a social security number) and in certain other
circumstances. Trustees of qualified retirement plans and 403(b)(7) accounts are
required by law to withhold 20% of the taxable portion of any distribution that
is eligible to be "rolled over." The 20% withholding requirement does not apply
to distributions from IRAs or any part of a distribution that is transferred
directly to another qualified retirement plan, 403(b)(7) account, or IRA.
Shareholders should consult their tax advisers regarding the 20% withholding
requirement.
Interest on indebtedness which is incurred to purchase or carry shares of a
mutual fund portfolio which distributes exempt-interest dividends during the
year is not deductible for federal income tax purposes. Further, the Tax-Free
Money Fund may not be an appropriate investment for persons who are `substantial
users' of facilities financed by industrial development bonds held by the
Tax-Free Money Fund or are `related persons' to such users; such persons should
consult their tax advisers before investing in the Tax-Free Money Fund.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Tax-Free Money
Fund, may be includible in modified alternative minimum taxable income.
Corporate shareholders are advised to consult their tax advisers with respect to
the consequences of the Superfund Act.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions except that confirmations of dividend
reinvestment for IRAs and other fiduciary accounts for which Investors Fiduciary
Trust Company serves as trustee will be sent quarterly. Firms may provide
varying arrangements with their clients with respect to confirmations. Tax
information will be provided annually. Shareholders are encouraged to retain
copies of their account confirmation statements or year-end statements for tax
reporting purposes. However, those who have incomplete records may obtain
historical account transaction information at a reasonable fee.
PERFORMANCE
The historical performance calculation for a Fund may be shown in the form of
"yield," "effective yield," "total return," "average annual total return" and,
for the Tax-Free Money Fund only, "tax equivalent yield." These various measures
of performance are described below.
Each Fund's yield is computed in accordance with a standardized method
prescribed by rules of the Securities and Exchange Commission. Under that
method, the current yield quotation is based on a seven-day period and is
computed for each Fund as follows. The first calculation is net investment
income per share, which is accrued interest on portfolio securities, plus or
minus amortized discount or premium (excluding market discount for the Tax-Free
Money Fund), less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and multiplied by 365
and the resulting yield figure is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation.
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<PAGE>
Each Fund's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is:
(base period return + 1)^365/7-1.
Average annual total return ("AATR") is found for a specific period by first
taking a hypothetical $1,000 investment ("initial investment") on the first day
of the period and computing the "redeemable value" of that investment at the end
of the period. The redeemable value is then divided by the initial investment,
and this quotient is taken to the Nth root (N representing the number of years
in the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all dividends have been reinvested at
net asset value on the reinvestment dates.
Total return is not calculated according to a standard formula, except when
calculated for the "Financial Highlights" table in the financial statements.
Total return is calculated similarly to AATR but is not annualized. It may be
shown as a percentage or the increased dollar value of the hypothetical
investment over the period.
All performance information shown below is for periods ended July ,1999.
<TABLE>
<CAPTION>
*Tax-
Effective Equivalent Total Total Total
Yield Yield Yield AATR AATR AATR Return Return Return
Fund 7 days 7 days 7 days 1 yr. 5 yrs. 10 yrs. 1 yr. 5 yrs. 10 yrs.
---- ------ ------ ------ ----- ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Money Market
Government Money
Tax-Free Money
* Based upon a marginal federal income tax rate of 37.1%.
The tax equivalent yield of the Tax-Free Money Fund is computed by dividing that
portion of the Fund's yield (computed as described above) which is tax-exempt by
(one minus the stated federal income tax rate) and adding the result to that
portion, if any, of the yield of the Fund that is not tax-exempt. For additional
information concerning tax-exempt yields, see "Tax-Exempt versus Taxable Yield"
below.
Each Fund's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in a Fund will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in a Fund is held, but also on such matters as Fund
expenses.
Money market mutual funds allow smaller investors to participate in the money
market and to receive money market yields that previously were available only to
those investors with large sums of money. Prior to the introduction of the first
money market mutual funds, small investors wanting to manage their cash reserves
had a limited choice of bank products available with a predetermined set of
interest rates such as passbook savings accounts and checking accounts.
Currently, there are hundreds of money market funds managing billions of dollars
for millions of investors. Zurich Money Funds is one of the largest money market
funds.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Money Market Fund, the Government Money
Fund and the Tax-Free Money Fund with that of their competitors. Past
performance cannot be a guarantee of future results.
As indicated in the prospectus (see "Performance"), the performance of the Funds
may be compared to that of other mutual funds tracked by Lipper Analytical
Services, Inc. ("Lipper"). Lipper performance calculations include the
reinvestment of all capital gain and income dividends for the periods covered by
the calculations. A Fund's performance also may be compared to other money
market funds reported by IBC Financial Data, Inc.'s Money
20
<PAGE>
Fund Report(R), or Money Market Insight(R), reporting services on money market
funds. As reported by IBC, all investment results represent total return
(annualized results for the period net of management fees and expenses) and one
year investment results are effective annual yields assuming reinvestment of
dividends. From time to time the Funds may include in their sales communications
ranking and rating information received from various organizations, to include
but not be limited to, ratings from Morningstar, Inc. and rankings from Lipper.
As indicated in the prospectus, a Fund's performance also may be compared on a
before or after-tax basis to various bank products, including the average rate
of bank and thrift institution money market deposit accounts, interest bearing
checking accounts and certificates of deposit as reported in the BANK RATE
MONITOR National Index(TM) of 100 leading bank and thrift institutions as
published by the BANK RATE MONITOR(TM), N. Palm Beach, Florida 33408. The rates
published by the BANK RATE MONITOR National Index(TM) are averages of the
personal account rates offered on the Wednesday prior to the date of publication
by 100 large banks and thrifts in the top ten Consolidated Standard Metropolitan
Statistical Areas.
With respect to money market deposit accounts and interest bearing checking
accounts, account minimums range upward from $2,000 in each institution and
compounding methods vary. Interest bearing checking accounts generally offer
unlimited check writing while money market deposit accounts generally restrict
the number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Generally, the rates
offered for these products take market conditions and competitive product yields
into consideration when set. Bank products represent a taxable alternative
income producing product. Bank and thrift institution deposit accounts may be
insured. Shareholder accounts in the Funds are not insured. Bank passbook
savings accounts compete with money market mutual fund products with respect to
certain liquidity features but may not offer all of the features available from
a money market mutual fund, such as check writing. Bank passbook savings
accounts normally offer a fixed rate of interest while the yield of the Funds
fluctuates. Bank checking accounts normally do not pay interest but compete with
money market mutual fund products with respect to certain liquidity features
(e.g., the ability to write checks against the account). Bank certificates of
deposit may offer fixed or variable rates for a set term. (Normally, a variety
of terms are available.) Withdrawal of these deposits prior to maturity will
normally be subject to a penalty. In contrast, shares of the Funds are
redeemable at the net asset value (normally, $1.00 per share) next determined
after a request is received, without charge.
Investors may also want to compare a Fund's performance to that of U.S. Treasury
bills or notes because such instruments represent alternative income producing
products. Treasury obligations are issued in selected denominations. Rates of
U.S. Treasury obligations are fixed at the time of issuance and payment of
principal and interest is backed by the full faith and credit of the U.S.
Treasury. The market value of such instruments will generally fluctuate
inversely with interest rates prior to maturity and will equal par value at
maturity. Generally, the values of obligations with shorter maturities will
fluctuate less than those with longer maturities. Each Fund's yield will
fluctuate. Also, while each Fund seeks to maintain a net asset value per share
of $1.00, there is no assurance that it will be able to do so.
Tax-Free versus Taxable Yield. You may want to determine which investment --
tax-free or taxable -- will provide you with a higher after-tax return. To
determine the taxable equivalent yield, simply divide the yield from the
tax-free investment by the sum of [1 minus your marginal tax rate]. The tables
below are provided for your convenience in making this calculation for selected
tax-free yields and taxable income levels. These yields are presented for
purposes of illustration only and are not representative of any yield that the
Tax-Free Money Fund may generate. Both tables are based upon current law as to
the 1999 federal tax rate schedules.
<TABLE>
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Under $124,500
21
<PAGE>
<CAPTION>
Your
Marginal A Tax-Exempt Yield of:
Taxable Income Federal Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Taxable Equivalent Yield Table for Persons Whose Adjusted Gross Income is Over $124,500*
<CAPTION>
Your
Marginal A Tax-Exempt Yield of:
Taxable Income Federal Tax 2% 3% 4% 5% 6% 7%
Single Joint Rate Is Equivalent to a Taxable Yield of:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
o This table assumes a decrease of $3.00 of itemized deductions for each $100
of adjusted gross income over $124,500. For a married couple with adjusted
gross income between $186,800 and $309,300 (single between $124,500 and
$247,000), add 0.7% to the above Marginal Federal Tax Rate for each
personal and dependency exemption. The taxable equivalent yield is the
tax-exempt yield divided by: 100% minus the adjusted tax rate. For example,
if the table tax rate is 37.1% and you are married with no dependents, the
adjusted tax rate is 38.5% (37.1% + 0.7% + 0.7%). For a tax-exempt yield of
6%, the taxable equivalent yield is about 9.8% (6% / (100% - 38.5%)).
22
<PAGE>
<PAGE>
OFFICERS AND TRUSTEES
The officers and trustees of the Trust, their birthdates, their principal
occupations and their affiliations, if any, with the Adviser and KDI, the
principal underwriter, or their affiliates, are as follows:
JOHN W. BALLANTINE (2/16/46), Trustee, 1500 North Lake Shore Drive, Chicago,
Illinois; First Chicago NBD Corporation/The First National Bank of Chicago:
1996-1998 Executive Vice President and Chief Risk Management Officer; 1995-1996
Executive Vice President and Head of International Banking; 1992-1995 Executive
Vice President, Chief Credit and Market Risk Officer.
LEWIS A. BURNHAM (1/8/33), Trustee, 16410 Avila Boulevard, Tampa, Florida;
Retired; formerly, Partner, Business Resources Group; formerly, Executive Vice
President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, 800 North Lindbergh Boulevard, St. Louis,
Missouri; Vice Chairman and Chief Financial Officer, Monsanto Company
(agricultural, pharmaceutical and nutritional/food products); formerly, Vice
President, Head of International Operations FMC Corporation (manufacturer of
machinery and chemicals).
DONALD R. JONES (1/17/30), Trustee, 182 Old Wick Lane, Inverness, Illinois;
Retired; Director, Motorola, Inc. (manufacturer of electronic equipment and
components); formerly, Executive Vice President and Chief Financial Officer,
Motorola, Inc.
SHIRLEY D. PETERSON (9/3/41), Trustee, 401 Rosemont Avenue, Frederick, Maryland;
President, Hood College; formerly, partner, Steptoe & Johnson (attorneys); prior
thereto, Commissioner, Internal Revenue Service; prior thereto, Assistant
Attorney General, U.S. Department of Justice; Director, Bethlehem Steel Corp.
CORNELIA M. SMALL (7/28/44), Trustee*, 345 Park Avenue, New York, NY; Managing
Director, Scudder Kemper.
WILLIAM P. SOMMERS (7/22/33), Trustee, 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); formerly, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director, Booz, Allen & Hamilton, Inc. (management consulting
firm) (retired); Director, Rohr, Inc., Therapeutic Discovery Corp. and Litton
Industries.
MARK S. CASADY (9/21/60), President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser; formerly, Institutional Sales Manager of an
unaffiliated mutual fund distributor.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, 222 South Riverside
Plaza, Chicago, Illinois; Senior Vice President, Adviser.
THOMAS W. LITTAUER (4/26/55), Vice President*, Two International Place, Boston,
Massachusetts; Managing Director, Adviser; formerly, Head of Broker Dealer
Division of an unaffiliated investment management firm during 1997; prior
thereto, President of Client Management Services of an unaffiliated investment
management firm from 1991 to 1996.
ANN M. McCREARY (11/6/56), Vice President*, 345 Park Avenue, New York, New York;
Managing Director, Adviser.
23
<PAGE>
ROBERT C. PECK, JR. (10/1/46), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser; formerly, Executive Vice
President and Chief Investment Officer with an unaffiliated investment
management firm from 1988 to June 1997.
KATHRYN L. QUIRK (12/3/52), Vice President*, 345 Park Avenue, New York, New
York; Managing Director, Adviser.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, 222 South Riverside Plaza,
Chicago, Illinois; Managing Director, Adviser.
LINDA J. WONDRACK (9/12/64), Vice President*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
JOHN R. HEBBLE (6/27/58), Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
BRENDA LYONS (2/21/63), Assistant Treasurer*, Two International Place, Boston,
Massachusetts; Senior Vice President, Adviser.
CAROLINE PEARSON (4/1/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Senior Vice President, Adviser; formerly, Associate,
Dechert Price & Rhoads (law firm) 1989 to 1997.
MAUREEN E. KANE (2/14/62), Assistant Secretary*, Two International Place,
Boston, Massachusetts; Vice President, Adviser; formerly, Assistant Vice
President of an unaffiliated investment management firm; prior thereto,
Associate Staff Attorney of an unaffiliated investment management firm;
Associate, Peabody & Arnold (law firm).
* Interested persons of the Funds as defined in the Investment Company Act of
1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Funds. The table below shows amounts paid or
accrued to those trustees who are not designated "interested persons" during the
Trust's 1999 fiscal year except that the information in the last column is for
calendar year 1998.
Total Compensation
From Trust and
Aggregate Compensation Fund Complex
Name of Trustee From Trust Paid to Trustees**
--------------- ---------- ------------------
John W. Ballantine(1) $ $
Lewis A. Burnham
Donald L. Dunaway*
Robert B. Hoffman
Donald R. Jones
Shirley D. Peterson
William P. Sommers
- ----------------
(1) Appointed to the Board May 18, 1999.
* Includes current fees deferred and interest pursuant to deferred
compensation agreements with the Trust. Deferred amounts accrue interest
monthly at a rate equal to the yield of Zurich Money Funds -- Zurich Money
Market Fund. Total deferred amounts and interest accrued through July 31,
1999 are $________ for Mr. Dunaway.
** Includes compensation for service on 25 funds managed by Scudder Kemper
with 43 fund portfolios. Each trustee currently serves as a trustee of 26
funds managed by Scudder Kemper with 48 fund portfolios.
24
<PAGE>
As of October 31, 1999, the officers and trustees of the Trust, as a group,
owned less than ____% of the outstanding shares of each Fund and no person owned
of record 5% or more of the outstanding shares of any Fund.
SPECIAL FEATURES
Automatic Withdrawal Program. If you own $5,000 or more of a Fund's shares you
may provide for the payment from your account of any requested dollar amount to
be paid to you or your designated payee monthly, quarterly, semi-annually or
annually. The $5,000 minimum account size is not applicable to Individual
Retirement Accounts. Dividend distributions will be automatically reinvested at
net asset value. A sufficient number of full and fractional shares will be
redeemed to make the designated payment. Depending upon the size of the payments
requested, redemptions for the purpose of making such payments may reduce or
even exhaust the account. The program may be amended on thirty days notice by
the Fund and may be terminated at any time by the shareholder or the Funds.
Tax-Sheltered Retirement Programs. The Shareholder Service Agent provides
retirement plan services and documents and can establish your account in any of
the following types of retirement plans:
o Individual Retirement Accounts (IRAs) with IFTC as custodian. This includes
Savings Incentive Match Plan for Employees of Small Employers ("SIMPLE"),
IRA accounts and Simplified Employee Pension Plan (SEP) IRA accounts and
prototype documents.
o 403(b) Custodial Accounts with IFTC as custodian. This type of plan is
available to employees of most non-profit organizations.
o Prototype money purchase pension and profit-sharing plans may be adopted by
employers. The maximum contribution per participant is the lesser of 25% of
compensation or $30,000.
Brochures describing the above plans as well as providing model defined benefit
plans, target benefit plans, 457 plans, 401(k) plans, SIMPLE 401(k) plans and
materials for establishing them are available from the Shareholder Service Agent
upon request. The brochures for plans with IFTC as custodian describe the
current fees payable to IFTC for its services as custodian. Investors should
consult with their own tax advisers before establishing a retirement plan.
SHAREHOLDER RIGHTS
The Trust generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Trust ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees, if a meeting is called for
such purpose; (b) the adoption of any contract for which shareholder approval is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Trust, a Fund or a class to the extent and as provided in the Declaration
of Trust; (d) any amendment of the Declaration of Trust (other than amendments
changing the name of the Trust, supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or inconsistent provision
thereof); ; and (e) such additional matters as may be required by law, the
Declaration of Trust, the By-laws of the Trust, or any registration of the Trust
with the Securities and Exchange Commission or any state, or as the trustees may
consider necessary or desirable. The shareholders also would vote upon changes
in fundamental investment objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of his
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Trust will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy in the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
25
<PAGE>
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Trust stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary to demand a meeting to consider removal of a trustee, the
Trust has undertaken to disseminate appropriate materials at the expense of the
requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Trust could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Trust and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Trust (or any Fund or class) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Trust. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Trust and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Trust or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust and the
Trust will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by Scudder Kemper remote
and not material since it is limited to circumstances in which a disclaimer is
inoperative and the Trust itself is unable to meet its obligations.
Master/Feeder Structure. The Board of Trustees has the discretion to retain the
current distribution arrangement for the Funds while investing in a master fund
in a master/feeder fund structure as described below. A master/feeder fund
structure is one in which a fund (a "feeder fund"), instead of investing
directly in a portfolio of securities, invests most or all of its investment
assets in a separate registered investment company (the "master fund") with
substantially the same investment objective and policies as the feeder fund.
Such a structure permits the pooling of assets of two or more feeder funds,
preserving separate identities or distribution channels at the feeder fund
level. Based on the premise that certain of the expenses of operating an
investment portfolio are relatively fixed, a larger investment portfolio may
eventually achieve a lower ratio of operating expenses to average net assets. An
existing investment company is able to convert to a feeder fund by selling all
of its investments, which involves brokerage and other transaction costs and
realization of a taxable gain or loss, or by contributing its assets to the
master fund and avoiding transaction costs and, if proper procedures are
followed, the realization of taxable gain or loss.
26
<PAGE>
APPENDIX -- RATINGS OF INVESTMENTS
COMMERCIAL PAPER RATINGS
A-1, A-2 and Prime-1, Prime-2 Commercial Paper Ratings
Commercial paper rated by Standard & Poor's Corporation has the following
characteristics: Liquidity ratios are adequate to meet cash requirements.
Long-term senior debt is rated "A" or better. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have an
upward trend with allowance made for unusual circumstances. Typically, the
issuer's industry is well established and the issuer has a strong position
within the industry. The reliability and quality of management are unquestioned.
Relative strength or weakness of the above factors determine whether the
issuer's commercial paper is rated A-1, A-2 or A-3.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's Investors Service, Inc. Among the factors considered by it
in assigning ratings are the following: (1) evaluation of the management of the
issuer; (2) economic evaluation of the issuer's industry or industries and an
appraisal of speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6) trend
of earnings over a period of ten years; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8) recognition
by the management of obligations which may be present or may arise as a result
of public interest questions and preparations to meet such obligations. Relative
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated Prime-1, 2 or 3.
MIG-1 and MIG-2 Municipal Notes
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Loans designated MIG-1 are of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing, or both. Loans designated MIG-2 are of high quality, with margins
of protection ample although not so large as in the preceding group.
STANDARD & POOR'S CORPORATION BOND RATINGS
AAA. This is the highest rating assigned by Standard & Poor's Corporation to a
debt obligation and indicates an extremely strong capacity to pay principal and
interest.
AA. Bonds rated AA also qualify as high-quality debt obligations. Capacity to
pay principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.
A. Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.
MOODY'S INVESTORS SERVICE, INC. BOND RATINGS
Aaa. Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
27
<PAGE>
Aa. Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A. Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
28
<PAGE>
ZURICH MONEY FUNDS
PART C.
OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<S> <C> <C> <C>
(a) (a)(1) Declaration of Trust is incorporated herein by reference to
Amendment No. 41 on Form N-1A filed on November 16, 1995.
(a)(2) Amendment to Declaration of Trust is incorporated herein by
reference to Amendment No. 41 on Form N-1A filed on November 16,
1995
(a)(3) Amendment to Declaration of Trust is incorporated herein by
reference to Amendment No. 41 on Form N-1A filed on November 16,
1995
(a)(4) Amendment to Declaration of Trust is incorporated herein by
reference to Amendment No. 42 on Form N-1A filed on or about
November 6, 1996.
(a)(5) Amendment to Declaration of Trust is incorporated herein by
reference to Amendment No. 43 on Form N-1A filed on or about
November 14, 1997.
(a)(6) Amended and Restated Declaration of Trust is incorporated herein
by reference to Post Effective Amendment No. 45 filed on November
25, 1998.
(b) By-Laws are incorporated herein by reference to Post-Effective
Amendment No. 41 to the Registration Statement filed on November,
16, 1995.
(c ) Specimen Share Certificate is incorporated herein by to
Post-Effective Amendment No. 41 to the Registration Statement filed
on November, 16, 1995.
(d) Investment Management Agreement for Zurich Money Market Fund, Zurich
Government Money Fund and Zurich Tax Free Money Fund is filed herein.
(e) Underwriting Agreement for Zurich Money Market Fund, Zurich Government Money
Fund and Zurich Tax Free Money Fund is incorporated herein by reference to
Post-Effective Amendment No. 45 filed on November 25, 1998.
(f) Inapplicable.
(g) Custodian Agreement for Zurich Money Market Fund, Zurich Government Money
Fund and Zurich Tax Free Money Fund is filed herein.
Part C - Page 1
<PAGE>
(h) (h)(1) Fund Accounting and Services Agreement for Money Market Fund is
incorporated herein by reference to Post-Effective Amendment No.
45, filed on November 25, 1998.
(h)(2) Fund Accounting and Services Agreement for Government Money Fund is
incorporated herein by reference to Post-Effective Amendment No.
45, filed on November 25, 1998.
(h)(3) Fund Accounting and Services Agreement for Tax Free Money Fund is
incorporated herein by reference to Post-Effective Amendment No.
45, filed on November 25, 1998.
(i) Legal Opinion of Counsel to be filed by subsequent amendment.
(j) Consent of Independent Auditors to be filed by subsequent amendment.
(k) Inapplicable.
(l) Inapplicable.
(m) Inapplicable.
(n) Inapplicable.
(o) Inapplicable.
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant
Not applicable.
Item 25. Indemnification
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees under certain
circumstances. However, in accordance with Section 17(h) and 17(i) of the
Investment Company Act of 1940 and its own terms, said Article of the Agreement
and Declaration of Trust does not protect any person against any liability to
the Registrant or its shareholders to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers, and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such trustee, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question as to whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
Part C - Page 2
<PAGE>
Item 26. Business or Other Connections of Investment Adviser
Scudder Kemper Investments, Inc. has stockholders and employees who are
denominated officers but do not as such have corporation-wide responsibilities.
Such persons are not considered officers for the purpose of this Item 26.
<TABLE>
<S> <C>
Stephen R. Beckwith Treasurer and Chief Financial Officer, Scudder Kemper Investments, Inc.**
Vice President and Treasurer, Scudder Fund Accounting Corporation*
Director, Scudder Stevens & Clark Corporation**
Director and Chairman, Scudder Defined Contribution Services, Inc.**
Director and President, Scudder Capital Asset Corporation**
Director and President, Scudder Capital Stock Corporation**
Director and President, Scudder Capital Planning Corporation**
Director and President, SS&C Investment Corporation**
Director and President, SIS Investment Corporation**
Director and President, SRV Investment Corporation**
Lynn S. Birdsong Director and Vice President, Scudder Kemper Investments, Inc.**
Director, Scudder, Stevens & Clark (Luxembourg) S.A.#
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, 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**
Part C - Page 3
<PAGE>
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 Financial 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
* Two International Place, Boston, MA
x 333 South Hope Street, Los Angeles, CA
** 345 Park Avenue, New York, NY
# Societe Anonyme, 47, Boulevard Royal, L-2449 Luxembourg, R.C. Luxembourg B 34.564
*** Toronto, Ontario, Canada
xxx Grand Cayman, Cayman Islands, British West Indies
oo 20-5, Ichibancho, Chiyoda-ku, Tokyo, Japan
### 1-7, Kojimachi, Chiyoda-ku, Tokyo, Japan
xx 222 S. Riverside, Chicago, IL
o Zurich Towers, 1400 American Ln., Schaumburg, IL
+ P.O. Box 309, Upland House, S. Church St., Grand Cayman, British West Indies
## Mythenquai-2, P.O. Box CH-8022, Zurich, Switzerland
</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> <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
Part C - Page 4
<PAGE>
Position and Offices with Positions and
Name Kemper Distributors, Inc. Offices with Registrant
---- ------------------------- -----------------------
Linda J. Wondrack Vice President & Chief Compliance None
Officer
Paula Gaccione Vice President None
Michael E. Harrington Vice President None
Robert A. Rudell Vice President None
William M. Thomas Vice President None
Todd N. Gierke Assistant Treasurer None
Philip J. Collora Assistant Secretary Vice President and
Secretary
Paul J. Elmlinger Assistant Secretary None
Diane E. Ratekin Assistant Secretary None
Mark S. Casady Director, Vice Chairman President
Stephen R. Beckwith Director None
</TABLE>
(c) Not applicable
Item 28. Location of Accounts and Records
Accounts, books and other documents are maintained at the offices of
the Registrant, the offices of Registrant's investment adviser, Scudder Kemper
Investments, Inc., 222 South Riverside Plaza, Chicago, Illinois 60606, at the
offices of the Registrant's principal underwriter, Kemper Distributors, Inc.,
222 South Riverside Plaza, Chicago, Illinois 60606 or, in the case of records
concerning custodial functions, at the offices of the custodian, State Street
Bank and Trust Company, 225 Franklin Street, Boston Massachusetts 02110 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.
Part C - Page 5
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(a) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 22nd day
of September, 1999.
Zurich Money Funds
By /s/ Mark S. Casady
----------------------------
Mark S. Casady, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on September 22, 1999 on behalf of
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Mark S. Casady September 22, 1999
- --------------------------------------
Mark S. Casady President
/s/ Thomas W. Littauer September 22, 1999
- --------------------------------------
Thomas W. Littauer Chairman and Trustee
/s/ John W. Ballantine September 22, 1999
- --------------------------------------
John W. Ballantine Trustee
/s/ Lewis A. Burnham September 22, 1999
- --------------------------------------
Lewis A. Burnham* Trustee
/s/ Donald L. Dunaway September 22, 1999
- --------------------------------------
Donald L. Dunaway* Trustee
/s/ Robert B. Hoffman September 22, 1999
- --------------------------------------
Robert B. Hoffman* Trustee
/s/ Donald R. Jones September 22, 1999
- --------------------------------------
Donald R. Jones* Trustee
/s/ Shirley D. Peterson September 22, 1999
- --------------------------------------
Shirley D. Peterson* Trustee
<PAGE>
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ William P. Sommers September 22, 1999
- --------------------------------------
William P. Sommers* Trustee
/s/ Cornelia M. Small September 22, 1999
- --------------------------------------
Cornelia M. Small Trustee
/s/ John R. Hebble September 22, 1999
- --------------------------------------
John R. Hebble Treasurer (Principal Financial and
Accounting Officer)
</TABLE>
*By: /s/ Philip J. Collora
----------------------------
Philip J. Collora**
** Philip J. Collora signs this document pursuant to powers
of attorney contained in Post-Effective Amendment No. 44
to the Registration Statement filed September 30, 1998
and filed herewith.
2
<PAGE>
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints Kathryn L.
Quirk, Caroline Pearson, and Philip J. Collora and each of them, any of whom may
act without the joinder of the others, as such person's attorney-in-fact to sign
and file on such person's behalf individually and in the capacity stated below
such registration statements, amendments, post-effective amendments, exhibits,
applications and other documents with the Securities and Exchange Commission or
any other regulatory authority as may be desirable or necessary in connection
with the public offering of shares of Zurich Money Funds.
Signature Title Date
--------- ----- ----
/s/ John W. Ballantine Trustee September 22, 1999
- -----------------------
<PAGE>
File No. 2-51992
File No. 811-2527
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
TO
FORM N-1A
PRE-EFFECTIVE AMENDMENT NO. 46
----
TO REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AND
AMENDMENT NO. 46
-----
TO REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
ZURICH MONEY FUNDS
<PAGE>
INDEX TO EXHIBITS
(d)
(g)
Ex. (d)
INVESTMENT MANAGEMENT AGREEMENT
Zurich Money Funds
222 South Riverside Plaza
Chicago, Illinois 60606
September 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
Investment Management Agreement
Zurich Money Market Fund
Zurich Government Money Fund
Zurich Tax-Free Money Fund
Ladies and Gentlemen:
ZURICH MONEY FUNDS (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized the Zurich Money Market Fund, the Zurich Government
Money Fund and the Zurich Tax-Free Money Fund (each a "Fund" and collectively,
the "Funds"). 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 Funds, has selected you to act as the investment
manager of the Funds 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. In the event the Trust establishes one or more additional
series with respect to which it desires to retain you to render the services
described hereunder, it shall notify you in writing. If you are willing to
render such services, you shall notify the Trust in writing, whereupon such
series shall become a Fund hereunder. Accordingly, the Trust on behalf of the
Funds agrees with you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of each 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 each 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
Funds:
(a) The Declaration, 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 each Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Funds, as applicable.
<PAGE>
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 Funds, you
shall provide continuing investment management of the assets of the Funds in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
each Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Funds 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
Funds 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 Funds'
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 each 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
each 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 each 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 Funds such office space and facilities in the United States as the Funds 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 Funds 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 Funds' transfer agent; assisting in the preparation
and filing of each Fund's federal, state and local tax returns; preparing and
filing each 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 each Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Funds 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 Funds' custodian or other agents of the
Funds; assisting in establishing the accounting policies of the Funds; assisting
in the resolution of accounting issues that may arise with respect to the Funds'
operations and consulting with the Funds' independent accountants, legal counsel
and the Funds' other agents as necessary in connection therewith; establishing
and monitoring each Fund's operating expense budgets; reviewing each Fund's
bills; processing the payment of bills that have been approved by an authorized
person; assisting the Funds in determining the amount of dividends and
<PAGE>
distributions available to be paid by each 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 Funds' business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Funds or any other person not a party to this Agreement which is
obligated to provide services to the Funds.
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 each Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Funds, 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 Funds 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 Funds' Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of each Fund: organization expenses of each
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 Funds' 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 Funds in connection with membership in investment company trade
organizations; fees and expenses of the Funds' 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 each Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of each Fund for sale; interest charges, bond premiums and other
insurance expense; freight, insurance and other charges in connection with the
shipment of each 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 Funds; expenses of printing and distributing reports, notices
and dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of each 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 a 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 a 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 a Fund shall have adopted a plan in conformity with Rule
12b-1 under the 1940 Act providing that a 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 a 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 Funds shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .50 of
1 percent of the combined average daily net assets as defined below of the Funds
for such month; provided that, for any calendar month during which the average
of such values exceeds $215,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $215,000,000 shall be 1/12 of
.375 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds 550,000,000, the fee payable for that
3
<PAGE>
month based on the portion of the average of such values in excess of
$550,000,000 shall be 1/12 of .30 of 1 percent of such portion; and provided
that, for any calendar month during which the average of such values exceeds
$800,000,000, the fee payable for that month based on the portion of the average
of such values in excess of $800,000,000 shall be 1/12 of .25 of 1 percent of
such portion; over (b) the greater of (i) the amount by which the Funds'
aggregate expenses exceed on an annual basis 1.5% of the first $30,000,000 of
combined average daily net assets and 1% of average daily net assets over
$30,000,000 or (ii) 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 Funds and unpaid.
The "average daily net assets" of a Fund shall mean the average of the values
placed on a 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 a 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 such 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 a 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 agree that your gross compensation for any fiscal year shall not be greater
than an amount which, when added to other expenses of the Funds, shall cause the
aggregate expenses of the Funds to exceed on an annual basis 1.5% of the first
$30,000,000 of combined average daily net assets and 1% of average daily net
assets over $30,000,000. Except to the extent that such amount has been
reflected in reduced payments to you, you shall refund to the Funds the amount
of any payment received in excess of the limitation pursuant to this section 5
as promptly as practicable after the end of such fiscal year, provided that you
shall not be required to pay the Funds an amount greater than the fee paid to
you in respect of such year pursuant to this Agreement. As used in this section
5, "expenses" shall mean those expenses included in the applicable expense
limitation having the broadest specifications thereof, and "expense limitation"
means a limit on the maximum annual expenses which may be incurred by an
investment company determined (i) by multiplying a fixed percentage by the
average, or by multiplying more than one such percentage by different specified
amounts of the average, of the values of an investment company's net assets for
a fiscal year or (ii) by multiplying a fixed percentage by an investment
company's net investment income for a fiscal year.
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 Funds' 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 Funds, 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 each 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 a Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
such Fund.
Your services to the Funds 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 a 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 Funds recognize that in some cases this
procedure may adversely affect the size of the position that may be acquired or
disposed of
4
<PAGE>
for the Funds.
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 a 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 Funds
or their shareholders to which you would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of your
duties, or by reason of your reckless disregard of your obligations and duties
hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until September 30, 1999, and continue in force from year to year
thereafter with respect to each Fund, but only so long as such continuance is
specifically approved for each Fund 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 such Fund. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with the
1940 Act and the rules and regulations thereunder and any applicable SEC
exemptive order therefrom.
This Agreement may be terminated with respect to a Fund at any time, without the
payment of any penalty, by the vote of a majority of the outstanding voting
securities of such 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 a 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 such Fund in the event that it shall have been
established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Zurich Money
Funds" refers to the Trustees under the Declaration collectively as Trustees and
not as individuals or personally, and that no shareholder of a Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of a 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 each Fund pursuant to this Agreement shall be limited in all cases
to each Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of a 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"),
5
<PAGE>
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 a
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 Funds.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
ZURICH MONEY FUNDS, on behalf of
Zurich Money Market Fund
Zurich Government Money Fund
Zurich Tax-Free Money Fund
By: /s/ Mark Casady
--------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By: /s/ Stephen Beckwith
---------------------------
Treasurer
6
<PAGE>
Ex. (g)
CUSTODIAN CONTRACT
between
ZURICH MONEY FUNDS
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. Employment of Custodian and Property to be Held By It...........1
2. Duties of the Custodian with Respect to Property of
the Fund Held by the Custodian in the United States.............2
2.1 Holding Securities.....................................2
2.2 Delivery of Securities.................................2
2.3 Registration of Securities.............................4
2.4 Bank Accounts..........................................5
2.5 Availability of Federal Funds..........................5
2.6 Collection of Income...................................5
2.7 Payment of Fund Monies.................................6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased...................................7
2.9 Appointment of Agents..................................7
2.10 Deposit of Securities in U.S. Securities System........7
2.11 Fund Assets Held in the Custodian's
Direct Paper System....................................8
2.12 Segregated Account.....................................9
2.13 Ownership Certificates for Tax Purposes ..............10
2.14 Proxies...............................................10
2.15 Communications Relating to Portfolio Securities.......10
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside the United States........................10
3.1 Appointment of Foreign Sub-Custodians.................10
3.2 Assets to be Held.....................................11
3.3 Foreign Securities Depositories.......................11
3.4 Agreements with Foreign Banking Institutions..........11
3.5 Access of Independent Accountants of the Fund.........11
3.6 Reports by Custodian..................................11
3.7 Transactions in Foreign Custody Account...............12
3.8 Liability of Foreign Sub-Custodians...................12
3.9 Liability of Custodian................................12
3.10 Reimbursement for Advances............................13
3.11 Monitoring Responsibilities...........................13
3.12 Branches of U.S. Banks................................13
3.13 Tax Law...............................................14
<PAGE>
TABLE OF CONTENTS
-----------------
Page
4. Payments for Sales or Repurchases or Redemptions
of Shares ....................................................14
5. Proper Instructions...........................................14
6. Actions Permitted without Express Authority...................15
7. Evidence of Authority.........................................15
8. Duties of Custodian with Respect to the Books of Account
and Calculations of Net Asset Value and Net Income............16
9. Records.......................................................16
10. Opinion of Fund's Independent Accountants.....................16
11. Reports to Fund by Independent Public Accountants.............16
12. Compensation of Custodian.....................................17
13. Responsibility of Custodian...................................17
14. Effective Period, Termination and Amendment...................18
15. Successor Custodian...........................................19
16. Interpretive and Additional Provisions....................... 19
17. Additional Funds..............................................20
18. Massachusetts Law to Apply....................................20
19. Prior Contracts...............................................20
20. Shareholder Communications Election...........................20
<PAGE>
CUSTODIAN CONTRACT
------------------
This Contract between Zurich Money Funds, a business trust organized
and existing under the laws of The Commonwealth of Massachusetts and having its
principal place of business at 222 South Riverside Plaza, Chicago, Illinois
60606 (the "Fund"), and State Street Bank and Trust Company, a Massachusetts
trust company having its principal place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "Custodian"),
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS, the Fund currently intends to offer shares in three (3)
series, Zurich Government Money Fund, Zurich Money Market Fund and Zurich
Tax-Free Money Fund (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
Article 17, being herein referred to as the "Portfolio(s)");
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto do hereby agree as follows:
1. Employment of Custodian and Property to be Held by It
-----------------------------------------------------
The Fund hereby employs the Custodian as the custodian of the assets of
the Portfolios of the Fund, including securities which the Fund, on behalf of
the applicable Portfolio desires to be held in places within the United States
of America ("domestic securities") and securities it desires to be held outside
the United States of America ("foreign securities") pursuant to the provisions
of the Fund's declaration of trust (the "Declaration of Trust"). The Fund on
behalf of the Portfolio(s) agrees to deliver to the Custodian all securities and
cash of the Portfolios, and all payments of income, payments of principal or
capital distributions received by it with respect to all securities owned by the
Portfolio(s) from time to time, and the cash consideration received by it for
such new or treasury shares of beneficial interest of the Fund representing
interests in the Portfolios ("Shares") as may be issued or sold from time to
time. The Custodian shall not be responsible for any property of a Portfolio
held or received by the Fund on behalf of the Portfolio and not delivered to the
Custodian.
<PAGE>
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 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
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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;
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6) To the issuer thereof, or its agent, for transfer into the
name of the Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.9 or into the name
or nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds,
certificates or other evidence representing the same aggregate
face amount or number of units; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Upon the sale of such securities for the account of the
Portfolio, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that, in any such case, the Custodian shall
have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained
in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
10) For delivery in connection with any loans of securities made
by the Portfolio, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian
and the Fund on behalf of the Portfolio, which may be in the
form of cash or obligations issued by the United States
government, its agencies or instrumentalities, except that in
connection with any loans for which collateral is to be
credited to the Custodian's U.S. Securities System Account,
the Custodian will not be held liable or responsible for the
delivery of securities owned by the Portfolio prior to the
receipt of such collateral;
11) For delivery as security in connection with any borrowings by
the Fund on behalf of the Portfolio requiring a pledge of
assets by the Fund on behalf of the Portfolio, but only
against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian and a broker-dealer registered under the Securities
Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding
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escrow or other arrangements in connection with transactions
by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the
Custodian, and a Futures Commission Merchant registered under
the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by
the Portfolio of the Fund;
14) Upon receipt of instructions from the transfer agent for the
Fund (the "Transfer Agent"), for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, as may be described from time to time
in the Fund's currently effective prospectus and statement of
additional information related to the Portfolio (the
"Prospectus"), in satisfaction of requests by holders of
Shares for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions from the Fund on behalf
of the applicable Portfolio, a certified copy of a resolution
of the Board of Trustees or of the executive committee thereof
signed by an officer of the Fund and certified by the Fund's
Secretary or Assistant Secretary specifying the securities of
the Portfolio to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper corporate purpose, and naming the person or
persons to whom delivery of such securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the
Portfolio or of any nominee of the Custodian which nominee shall be
assigned exclusively to the Portfolio, unless the Fund has authorized
in writing the appointment of a nominee to be used in common with other
registered investment companies having the same investment adviser as
the Portfolio, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any
sub-custodian appointed pursuant to Article 1. All securities accepted
by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form. If,
however, the Fund directs the Custodian to maintain securities in
"street name", the Custodian shall utilize reasonable efforts only to
(i) timely collect income due the Fund on such securities and (ii)
notify the Fund of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio
of the Fund, subject only to draft or order by the Custodian acting
pursuant to the terms of this Contract, and shall hold in such account
or accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Portfolio, other than cash maintained by
the Portfolio in a bank account
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<PAGE>
established and used in accordance with Rule 17f-3 under the Investment
Company Act of 1940, as amended. Funds held by the Custodian for a
Portfolio may be deposited by it to its credit as Custodian in the
banking department of the Custodian or in such other banks or trust
companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of
1940, as amended (the "Investment Company Act") and that each such bank
or trust company and the funds to be deposited with each such bank or
trust company shall on behalf of each applicable Portfolio be approved
by vote of a majority of the Board of Trustees. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian
shall, upon the receipt of Proper Instructions from the Fund on behalf
of a Portfolio, make federal funds available to such Portfolio as of
specified times agreed upon from time to time by the Fund and the
Custodian in the amount of checks received in payment for Shares of
such Portfolio which are deposited into the Portfolio's account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments
with respect to United States-registered securities held hereunder to
which each Portfolio shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely basis
all income and other payments with respect to domestic bearer
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to such Portfolio's account. Without limiting the
generality of the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring presentation as
and when they become due and shall collect interest when due on
securities held hereunder. Collection of income due each Portfolio on
domestic securities loaned pursuant to the provisions of Section 2.2
(10) shall be the responsibility of the Fund; the Custodian will have
no duty or responsibility in connection therewith, other than to
provide the Fund with such information or data in its possession as may
be necessary to assist the Fund in arranging for the timely delivery to
the Custodian of the income to which the Portfolio is properly
entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the
Fund on behalf of the applicable Portfolio, which may be continuing
instructions when deemed appropriate by the parties, the Custodian
shall pay out monies of a Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of
the Portfolio but only (a) against the delivery of such
securities or evidence of title to such options, futures
contracts or options on futures contracts to the Custodian (or
any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the
Investment Company Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Portfolio or in
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<PAGE>
the name of a nominee of the Custodian referred to in Section
2.3 hereof or in proper form for transfer; (b) in the case of
a purchase effected through a U.S. Securities System, in
accordance with the conditions set forth in Section 2.10
hereof; (c) in the case of a purchase involving the Direct
Paper System, in accordance with the conditions set forth in
Section 2.11; (d) in the case of repurchase agreements entered
into between the Fund on behalf of the Portfolio and the
Custodian, or another bank, or a broker-dealer which is a
member of NASD, (i) against delivery of the securities either
in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Portfolio of securities owned by the Custodian
along with written evidence of the agreement by the Custodian
to repurchase such securities from the Portfolio or (e) for
transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected
prior to receipt of a confirmation from a broker and/or the
applicable bank pursuant to Proper Instructions from the Fund
as defined in Article 5;
2) In connection with conversion, exchange or surrender of
securities owned by the Portfolio as set forth in Section 2.2
hereof;
3) For the redemption or repurchase of Shares issued by the
Portfolio as set forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the
Portfolio, including but not limited to the following payments
for the account of the Portfolio: interest, taxes, management
fees, accounting fees, transfer agent fees, legal fees and
operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends on Shares of the Portfolio
declared pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the
Portfolio, a certified copy of a resolution of the Board of
Trustees or of the executive committee thereof signed by an
officer of the Fund and certified by the Fund's Secretary or
an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be
made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be
made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as specifically stated otherwise in this Contract, in any and
every case where payment for purchase of domestic securities for the
account of a Portfolio is made by the Custodian in advance of
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<PAGE>
receipt of the securities purchased in the absence of specific written
instructions from the Fund on behalf of such Portfolio to so pay in
advance, the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been received by
the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company Act to
act as a custodian, as its agent to carry out such of the provisions of
this Article 2 as the Custodian may from time to time direct; provided,
however, that the appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities hereunder.
2.10 Deposit of Securities in U.S. Securities Systems. The Custodian may
deposit and/or maintain domestic securities owned by a Portfolio in a
clearing agency registered with the Securities and Exchange Commission
(the "SEC") under Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies (a "U.S.
Securities System") in accordance with applicable Federal Reserve Board
and SEC rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep domestic securities of the Portfolio in
a U.S. Securities System provided that such securities are
represented in a U.S. Securities System Account;
2) The records of the Custodian with respect to securities of the
Portfolio which are maintained in a U.S. Securities System
shall identify by book-entry those securities belonging to the
Portfolio;
3) The Custodian shall pay for domestic securities purchased for
the account of the Portfolio upon (i) receipt of advice from
the U.S. Securities System that such securities have been
transferred to the U.S. Securities System Account and (ii) the
making of an entry on the records of the Custodian to reflect
such payment and transfer for the account of the Portfolio;
the Custodian shall transfer securities sold for the account
of the Portfolio upon (i) receipt of advice from the U.S.
Securities System that payment for such securities has been
transferred to the U.S. Securities System Account and (ii) the
making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Portfolio.
Copies of all advices from the U.S. Securities System of
transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the
Custodian and be provided to the Fund at its request. Upon
request, the Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio in the form of a written advice or notice and
shall furnish to the Fund on behalf of the Portfolio copies of
daily transaction sheets reflecting each day's transactions in
the U.S. Securities System for the account of the Portfolio;
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<PAGE>
4) The Custodian shall provide the Fund on behalf of the
Portfolio(s) with any report obtained by the Custodian on the
U.S. Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of
the Portfolio the initial or annual certificate, as the case
may be, required by Article 14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for the benefit of the
Portfolio for any loss or damage to the Portfolio resulting
from use of the U.S. Securities System by reason of any
negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from
failure of the Custodian or any such agent to enforce
effectively such rights as it may have against the U.S.
Securities System; at the election of the Fund, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that the
Portfolio has not been made whole for any such loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the
Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper
System will be effected in the absence of Proper Instructions
from the Fund on behalf of the Portfolio;
2) The Custodian may keep securities of the Portfolio in the
Direct Paper System only if such securities are represented in
the Direct Paper System Account which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Portfolio which are maintained in the Direct Paper System
shall identify by book-entry those securities belonging to the
Portfolio;
4) The Custodian shall pay for securities purchased for the
account of the Portfolio upon the making of an entry on the
records of the Custodian to reflect such payment and transfer
of securities to the account of the Portfolio. The Custodian
shall transfer securities sold for the account of the
Portfolio upon the making of an entry on the records of the
Custodian to reflect such transfer and receipt of payment for
the account of the Portfolio;
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5) The Custodian shall furnish the Fund on behalf of the
Portfolio confirmation of each transfer to or from the account
of the Portfolio, in the form of a written advice or notice,
of Direct Paper on the next business day following such
transfer and shall furnish to the Fund on behalf of the
Portfolio copies of daily transaction sheets reflecting each
day's transaction in the Direct Paper System for the account
of the Portfolio; and
6) Upon the reasonable request of the Fund, the Custodian shall
provide the Fund with any report on the Direct Paper System's
system of internal accounting controls which had been prepared
as of the time of such request.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio
establish and maintain a segregated account or accounts for and on
behalf of each such Portfolio, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
a U.S. Securities System Account by the Custodian pursuant to Section
2.10 hereof (i) in accordance with the provisions of any agreement
among the Fund on behalf of the Portfolio, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the
NASD (or any futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The Options
Clearing Corporation and of any registered national securities exchange
(or the Commodity Futures Trading Commission or any registered Contract
Market), or of any similar organization or organizations, regarding
escrow or other arrangements in connection with transactions by the
Portfolio, (ii) for purposes of segregating cash or government
securities in connection with options purchased, sold or written by the
Portfolio or commodity futures contracts or options thereon purchased
or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act
Release No. 10666, or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate purposes, but
only, in the case of this clause (iv), upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or
of the executive committee thereof signed by an officer of the Fund and
certified by the Fund's Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to domestic securities of each Portfolio held by
it and in connection with transfers of such securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities
held hereunder, cause to be promptly executed by the registered holder
of such securities, if the securities are registered otherwise than in
the name of the Portfolio or a nominee of the Portfolio, all proxies,
without indication of the manner in which such proxies are to be voted,
and shall
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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
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Outside of the United States
----------------------------
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the
foreign banking institutions and foreign securities depositories
designated on Schedule A hereto (the "foreign sub-custodians"). Upon
receipt of Proper Instructions, together with a certified resolution of
the Board of Trustees, the Custodian and the Fund on behalf of the
Portfolio(s) may agree to amend Schedule A hereto from time to time to
designate additional foreign banking institutions and foreign
securities depositories to act as sub-custodian. Upon receipt of Proper
Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more such foreign sub-custodians for
maintaining custody of the Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5
under the Investment Company Act of 1940, and (b) cash and cash
equivalents in such amounts as the Custodian or the Fund may determine
to be reasonably necessary to effect the Fund's foreign securities
transactions. The Custodian shall identify on its books as belonging to
the Fund, the foreign securities of the Fund held by each foreign
sub-custodian.
3.3 Foreign Securities Depositories. Except as may otherwise be agreed upon
in writing by the Custodian and the Fund, assets of the Funds shall be
maintained in foreign securities depositories only through arrangements
implemented by the foreign banking institutions serving as
sub-custodians pursuant to the terms hereof. Where possible, such
arrangements shall include entry into agreements containing the
provisions set forth in Section 3.4 hereof.
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3.4 Agreements with Foreign Banking Institutions. Each agreement with a
foreign banking institution shall provide that (a) the assets of each
Portfolio will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution
or its creditors or agent, except a claim of payment for their safe
custody or administration; (b) beneficial ownership of the assets of
each Portfolio will be freely transferable without the payment of money
or value other than for custody or administration; (c) adequate records
will be maintained identifying the assets as belonging to the Custodian
on behalf of its customers; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the extent
permitted under applicable law the independent public accountants for
the Fund, will be given access to the books and records of the foreign
banking institution relating to its actions under its agreement with
the Custodian; and (e) assets of the Portfolios held by the foreign
sub-custodian will be subject only to the instructions of the Custodian
or its agents.
3.5 Access of Independent Accountants of the Fund. Upon request of the
Fund, the Custodian will use reasonable efforts to arrange for the
independent accountants of the Fund to be afforded access to the books
and records of any foreign banking institution employed as a foreign
sub-custodian insofar as such books and records relate to the
performance of such foreign banking institution under its agreement
with the Custodian.
3.6 Reports by Custodian. The Custodian will supply to the Fund from time
to time, as mutually agreed upon, statements in respect of the
securities and other assets of the Portfolio(s) held by foreign
sub-custodians, including but not limited to an identification of
entities having possession of Portfolio securities and other assets and
advices or notifications of any transfers of securities to or from each
custodial account maintained by a foreign banking institution for the
Custodian on behalf of its customers indicating, as to securities
acquired for a Portfolio, the identity of the entity having physical
possession of such securities.
3.7 Transactions in Foreign Custody Account. (a) Except as otherwise
provided in paragraph (b) of this Section 3.7, the provision of
Sections 2.2 and 2.7 of this Contract shall apply, mutatis mutandis to
the foreign securities of the Portfolio(s) held outside the United
States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary,
settlement and payment for securities received for the account of each
applicable Portfolio and delivery of securities maintained for the
account of each applicable Portfolio may be effected in accordance with
the customary established securities trading or securities processing
practices and procedures in the jurisdiction or market in which the
transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such
purchaser or dealer.
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(c) Securities maintained in the custody of a foreign sub-custodian may
be maintained in the name of such entity's nominee to the same extent
as set forth in Section 2.3 of this Contract, and the Fund agrees to
hold any such nominee harmless from any liability as a holder of record
of such securities.
3.8 Liability of Foreign Sub-Custodians. Each agreement pursuant to which
the Custodian employs a foreign banking institution as a foreign
sub-custodian shall require the institution to exercise reasonable care
in the performance of its duties and to indemnify, and hold harmless,
the Custodian and the Fund from and against any loss, damage, cost,
expense, liability or claim arising out of or in connection with the
institution's performance of such obligations. At the election of the
Fund on behalf of the Portfolio, it shall be entitled to be subrogated
to the rights of the Custodian with respect to any claims against a
foreign banking institution as a consequence of any such loss, damage,
cost, expense, liability or claim if and to the extent that the
Portfolio has not been made whole for any such loss, damage, cost,
expense, liability or claim.
3.9 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set
forth with respect to sub-custodians generally in this Contract and,
regardless of whether assets are maintained in the custody of a foreign
banking institution, a foreign securities depository or a branch of a
U.S. bank as contemplated by Section 3.12 hereof, the Custodian shall
not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions,
or acts of war or terrorism or any loss where the sub-custodian has
otherwise exercised reasonable care. Notwithstanding the foregoing
provisions of this Section 3.9, in delegating custody duties to State
Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except
such loss as may result from (a) political risk (including, but not
limited to, exchange control restrictions, confiscation, expropriation,
nationalization, insurrection, civil strife or armed hostilities) or
(b) other losses (excluding a bankruptcy or insolvency of State Street
London Ltd. not caused by political risk) due to Acts of God, nuclear
incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
3.10 Reimbursement for Advances. If the Fund requires the Custodian to
advance cash or securities for any purpose for the benefit of a
Portfolio including the purchase or sale of foreign exchange or of
contracts for foreign exchange, or in the event that the Custodian or
its nominee shall incur or be assessed any taxes, charges, expenses,
assessments, claims or liabilities in connection with the performance
of this Contract, except such as may arise from its or its nominee's
own negligent action, negligent failure to act or willful misconduct,
any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of such Portfolio's assets to the extent
necessary to obtain reimbursement.
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3.11 Monitoring Responsibilities. The Custodian shall furnish annually to
the Fund (during the month of June) information concerning the foreign
sub-custodians employed by the Custodian. Such information shall be
similar in kind and scope to that furnished to the Fund in connection
with the initial approval of this Contract. In addition, the Custodian
will promptly inform the Fund in the event that the Custodian learns of
a material adverse change in the financial condition of a foreign
sub-custodian or any material loss of the assets of the Fund or in the
case of any foreign sub-custodian not the subject of an exemptive order
from the SEC is notified by such foreign sub-custodian that there
appears to be a substantial likelihood that its shareholders' equity
will decline below $200 million (U.S. dollars or the local currency
equivalent thereof) or that its shareholders' equity has declined below
$200 million (in each case computed in accordance with generally
accepted U.S. accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of
Portfolio assets are maintained in a foreign branch of a banking
institution which is a "bank" as defined by Section 2(a)(5) of the
Investment Company Act meeting the qualification set forth in Section
26(a) of said Act. The appointment of any such branch as a
sub-custodian shall be governed by Article 1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom
shall be maintained in an interest bearing account established for the
Fund with the Custodian's London branch, which account shall be subject
to the direction of the Custodian, State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Custodian
as custodian of the Fund by the tax law of the United States. It shall
be the responsibility of the Fund to notify the Custodian of the
obligations imposed on the Fund or the Custodian as custodian of the
Fund by the tax law of jurisdictions other than those mentioned in the
above sentence, including responsibility for withholding and other
taxes, assessments or other governmental charges, certifications and
governmental reporting. The sole responsibility of the Custodian with
regard to such tax law shall be to use reasonable efforts to assist the
Fund with respect to any claim for exemption or refund under the tax
law of jurisdictions for which the Fund has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares
----------------------------------------------------------
The Custodian shall receive from the distributor for the Shares or from
the Transfer Agent and deposit into the account of the appropriate Portfolio
such payments as are received for Shares of that Portfolio issued or sold from
time to time by the Fund. The Custodian will provide timely notification to the
Fund on behalf of each Portfolio and the Transfer Agent of any receipt by it of
payments for Shares of such Portfolio.
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From such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of the Board of
Trustees pursuant thereto, the Custodian shall, upon receipt of instructions
from the Transfer Agent, make funds available for payment to holders of Shares
who have delivered to the Transfer Agent a request for redemption or repurchase
of their Shares. In connection with the redemption or repurchase of Shares, the
Custodian is authorized upon receipt of instructions from the Transfer Agent to
wire funds to or through a commercial bank designated by the redeeming
shareholders. In connection with the redemption or repurchase of Shares, the
Custodian shall honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of Shares, when presented
to the Custodian in accordance with such procedures and controls as are mutually
agreed upon from time to time between the Fund and the Custodian.
5. Proper Instructions
-------------------
Proper Instructions as used throughout this Contract means a writing
signed or initialed by one or more person or persons as the Board of Trustees
shall have from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved, including a specific
statement of the purpose for which such action is requested. Oral instructions
will be considered Proper Instructions if the Custodian reasonably believes them
to have been given by a person authorized to give such instructions with respect
to the transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. If given pursuant to procedures to be agreed upon by the
Custodian and the Fund, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices. For purposes of this
Section, Proper Instructions shall include instructions received by the
Custodian pursuant to any three - party agreement which requires a segregated
asset account in accordance with Section 2.12.
6. Actions Permitted without Express Authority
-------------------------------------------
The Custodian may in its discretion, without express authority from the
Fund on behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Fund on behalf of the Portfolio;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Portfolio, checks,
drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of the Portfolio except as otherwise directed by the Board of
Trustees.
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7. Evidence of Authority
---------------------
The Custodian shall be protected in acting upon any instructions,
notice, request, consent, certificate or other instrument or paper believed by
it to be genuine and to have been properly executed by or on behalf of the Fund.
The Custodian may receive and accept a certified copy of a vote of the Board of
Trustees as conclusive evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination or of any action by the
Board of Trustees pursuant to the Declaration of Trust as described in such
vote, and such vote may be considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and
------------------------------------------------------------
Calculation of Net Asset Value and Net Income
---------------------------------------------
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of Trustees to keep the books of
account of each Portfolio and/or compute the net asset value per share of the
outstanding Shares of each Portfolio or, if directed in writing to do so by the
Fund on behalf of the Portfolio(s), shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Prospectus and shall advise the Fund and the Transfer Agent daily of the total
amount of such net income and, if instructed in writing by an officer of the
Fund to do so, shall advise the Transfer Agent periodically of the division of
such net income among its various components. The calculations of the net asset
value per share and the daily income of each Portfolio shall be made at the time
or times described from time to time in the Prospectus.
9. Records
-------
The Custodian shall with respect to each Portfolio create and maintain
all records relating to its activities and obligations under this Contract in
such manner as will meet the obligations of the Fund under the Investment
Company Act, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the SEC. The Custodian shall, at the Fund's request,
supply the Fund with a tabulation of securities owned by each Portfolio and held
by the Custodian and shall, when requested to do so by the Fund and for such
compensation as shall be agreed upon between the Fund and the Custodian, include
certificate numbers in such tabulations.
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10. Opinion of Fund's Independent Accountants
-----------------------------------------
The Custodian shall take all reasonable action, as the Fund on behalf
of each applicable Portfolio may from time to time request, to obtain from year
to year favorable opinions from the Fund's independent accountants with respect
to its activities hereunder in connection with the preparation of the Fund's
Form N-1A and N-SAR or other annual reports to the SEC and with respect to any
other SEC requirements.
11. Reports to Fund by Independent Public Accountants
-------------------------------------------------
The Custodian shall provide the Fund at such times as the Fund may
reasonably require, with reports by independent public accountants on the
accounting system, internal accounting control and procedures for safeguarding
securities, futures contracts and options on futures contracts, including
securities deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
12. Compensation of Custodian
-------------------------
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian as agreed upon from time to time between the
Fund on behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
---------------------------
So long as and to the extent that it is in the exercise of reasonable
care, the Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received by it or
delivered by it pursuant to this Contract and shall be held harmless in acting
upon any notice, request, consent, certificate or other instrument reasonably
believed by it to be genuine and to be signed by the proper party or parties,
including any futures commission merchant acting pursuant to the terms of a
three-party futures or options agreement. The Custodian shall be held to the
exercise of reasonable care in carrying out the provisions of this Contract, but
shall be kept indemnified by and shall be without liability to the Fund for any
action taken or omitted by it in good faith without negligence. It shall be
entitled to rely on and may act upon advice of counsel (who may be counsel for
the Fund) on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
The Custodian shall be liable for the acts or omissions of a foreign
banking institution appointed pursuant to the provisions of Article 3 to the
same extent as set forth in Article 1 hereof
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with respect to sub-custodians located in the United States (except as
specifically provided in Section 3.9) and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign securities
depository or a branch of a U.S. bank as contemplated by Section 3.12 hereof,
the Custodian shall not be liable for any loss, damage, cost, expense, liability
or claim resulting from, or caused by, the direction of or authorization by the
Fund to maintain custody or any securities or cash of the Fund in a foreign
country including, but not limited to, losses resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism.
If the Fund on behalf of a Portfolio requires the Custodian to take any
action with respect to securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its nominee assigned to the Fund or the Portfolio being liable for the payment
of money or incurring liability of some other form, the Fund on behalf of the
Portfolio, as a prerequisite to requiring the Custodian to take such action,
shall provide indemnity to the Custodian in an amount and form satisfactory to
the Custodian.
If the Fund requires the Custodian, its affiliates, subsidiaries or
agents, to advance cash or securities for any purpose (including but not limited
to securities settlements, the purchase or sale of foreign exchange or of
contracts for foreign exchange, and assumed settlement) for the benefit of a
Portfolio, or in the event that the Custodian or its nominee shall incur or be
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Contract, except such as may arise from
its or its nominee's own negligent action, negligent failure to act or willful
misconduct, any property at any time held for the account of the applicable
Portfolio shall be security therefor and should the Fund fail to repay the
Custodian promptly, the Custodian shall be entitled to utilize available cash
and to dispose of such Portfolio's assets to the extent necessary to obtain
reimbursement.
14. Effective Period, Termination and Amendment
-------------------------------------------
This Contract shall become effective as of the date of its execution,
shall continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the parties hereto
and may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than thirty (30) days after the date of such delivery or mailing;
provided, however that the Custodian shall not with respect to a Portfolio act
under Section 2.10 hereof in the absence of receipt of an initial certificate of
the Secretary or an Assistant Secretary that the Board of Trustees has approved
the initial use of a particular Securities System by such Portfolio, as required
by Rule 17f-4 under the Investment Company Act and that the Custodian shall not
with respect to a Portfolio act under Section 2.11 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant Secretary
that the Board of Trustees has approved the initial use of the Direct Paper
System by such Portfolio; provided further, however, that the Fund shall not
amend or terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Declaration of Trust, and further
provided, that the Fund on behalf of one or more of the Portfolios may at any
time by action of the Board of Trustees (i) substitute another bank or trust
company for the Custodian by giving notice as described above to the Custodian
or (ii)
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immediately terminate this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the Comptroller of the Currency or
upon the happening of a like event at the direction of an appropriate regulatory
agency or court of competent jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
-------------------
If a successor custodian shall be appointed by the Board of Trustees,
the Custodian shall, upon termination, deliver to such successor custodian at
the offices of the Custodian, duly endorsed and in the form for transfer, all
securities of each applicable Portfolio then held by it hereunder and shall
transfer to an account of the successor custodian all of the securities of each
such Portfolio held in a Securities System. If no such successor custodian shall
be appointed, the Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Board of Trustees, deliver at the offices of the Custodian
and transfer such securities, funds and other properties in accordance with such
vote. In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act, doing
business in Boston, Massachusetts, or New York, New York, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $25,000,000, all securities, funds and
other properties held by the Custodian on behalf of each applicable Portfolio
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract on behalf of each applicable Portfolio
and to transfer to an account of such successor custodian all of the securities
of each such Portfolio held in any Securities System. Thereafter, such bank or
trust company shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
--------------------------------------
In connection with the operation of this Contract, the Custodian and
the Fund on behalf of each of the Portfolios may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both
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parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Declaration of Trust. No interpretive or
additional provisions made as provided in the preceding sentence shall be deemed
to be an amendment of this Contract.
17. Additional Funds
----------------
In the event that the Fund establishes one or more series of Shares in
addition to Zurich Government Money Fund, Zurich Money Market Fund and Zurich
Tax-Free Money Fund with respect to which it desires to have the Custodian
render services as custodian under the terms hereof, it shall so notify the
Custodian in writing, and if the Custodian agrees in writing to provide such
services, such series of Shares shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
--------------------------
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
---------------
This Contract supersedes and terminates, as of the date hereof, all
prior contracts between the Fund and the Custodian relating to the custody of
the assets of the Portfolio(s).
20. Shareholder Communications Election
-----------------------------------
SEC Rule 14b-2 requires banks which hold securities for the account of
customers to respond to requests by issuers of securities for the names,
addresses and holdings of beneficial owners of securities of that issuer held by
the bank unless the beneficial owner has expressly objected to disclosure of
this information. In order to comply with the rule, the Custodian needs the Fund
to indicate whether it authorizes the Custodian to provide the Fund's name,
address, and share position to requesting companies whose securities the Fund
owns. If the Fund tells the Custodian "no", the Custodian will not provide this
information to requesting companies. If the Fund tells the Custodian "yes" or
does not check either "yes" or "no" below, the Custodian is required by the rule
to treat the Fund as consenting to disclosure of this information for all
securities owned by the Fund or any funds or accounts established by the Fund.
For the Fund's protection, the Rule prohibits the requesting company from using
the Fund's name and address for any purpose other than corporate communications.
Please indicate below whether the Fund consents or objects by checking one of
the alternatives below.
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
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IN WITNESS WHEREOF, each of the parties has caused this instrument to
be executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of April 19, 1999.
ATTEST ZURICH MONEY FUNDS
/s/Maureen Kane By: /s/ Mark Casady
- ---------------------- ---------------------------
Name: Maureen Kane Name: Mark Casady
Assistant Secretary Title: President
ATTEST STATE STREET BANK AND TRUST COMPANY
/s/ Marc L. Parsons By: /s/ Ronald E. Logue
- ------------------------- ---------------------------
Marc L. Parsons Ronald E. Logue
Associate Counsel Vice Chairman
21
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