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<PAGE> PAGE 2
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<PAGE> PAGE 3
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<PAGE> PAGE 4
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<PAGE> PAGE 7
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<PAGE> PAGE 8
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<PAGE> PAGE 11
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<PAGE> PAGE 14
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SIGNATURE PHILIP J. COLLORA
TITLE V.P. & SECRETARY
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<SERIES>
<NUMBER> 033
<NAME> KEMPER CASH RESERVES FUND - CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 710,733
<INVESTMENTS-AT-VALUE> 710,733
<RECEIVABLES> 6,833
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 717,566
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 69,561
<TOTAL-LIABILITIES> 69,561
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 648,005
<SHARES-COMMON-STOCK> 96,771
<SHARES-COMMON-PRIOR> 67,883
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 648,005
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 25,358
<OTHER-INCOME> 0
<EXPENSES-NET> 8,188
<NET-INVESTMENT-INCOME> 17,170
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 17,170
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (17,170)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,115,324
<NUMBER-OF-SHARES-REDEEMED> (1,088,087)
<SHARES-REINVESTED> 1,651
<NET-CHANGE-IN-ASSETS> 98,616
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,917
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,188
<AVERAGE-NET-ASSETS> 66,625
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 1.75
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1999 ANNUAL REPORT TO
SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701638
<NAME> KEMPER PORTFOLIOS
<SERIES>
<NUMBER> 051
<NAME> KEMPER U.S. MORTGAGE FUND - CLASS A
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 1,906,140
<INVESTMENTS-AT-VALUE> 1,893,047
<RECEIVABLES> 208,982
<ASSETS-OTHER> 188
<OTHER-ITEMS-ASSETS> 1,978
<TOTAL-ASSETS> 2,104,195
<PAYABLE-FOR-SECURITIES> 288,228
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,690
<TOTAL-LIABILITIES> 297,918
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,421,318
<SHARES-COMMON-STOCK> 246,052
<SHARES-COMMON-PRIOR> 297,178
<ACCUMULATED-NII-CURRENT> 6,207
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (607,902)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13,346)
<NET-ASSETS> 1,806,277
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 139,433
<OTHER-INCOME> 0
<EXPENSES-NET> 22,614
<NET-INVESTMENT-INCOME> 116,819
<REALIZED-GAINS-CURRENT> 6,601
<APPREC-INCREASE-CURRENT> (113,699)
<NET-CHANGE-FROM-OPS> 9,721
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (123,040)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 40,206
<NUMBER-OF-SHARES-REDEEMED> (336,467)
<SHARES-REINVESTED> 66,005
<NET-CHANGE-IN-ASSETS> (377,898)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (614,810)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,100
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,614
<AVERAGE-NET-ASSETS> 1,745,164
<PER-SHARE-NAV-BEGIN> 7.15
<PER-SHARE-NII> .42
<PER-SHARE-GAIN-APPREC> (.38)
<PER-SHARE-DIVIDEND> (.44)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.75
<EXPENSE-RATIO> 1.02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1999 ANNUAL REPORT TO
SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701638
<NAME> KEMPER PORTFOLIOS
<SERIES>
<NUMBER> 052
<NAME> KEMPER U.S. MORTGAGE FUND - CLASS B
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 1,906,140
<INVESTMENTS-AT-VALUE> 1,893,047
<RECEIVABLES> 208,982
<ASSETS-OTHER> 188
<OTHER-ITEMS-ASSETS> 1,978
<TOTAL-ASSETS> 2,104,195
<PAYABLE-FOR-SECURITIES> 288,228
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,690
<TOTAL-LIABILITIES> 297,918
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,421,318
<SHARES-COMMON-STOCK> 20,991
<SHARES-COMMON-PRIOR> 234,186
<ACCUMULATED-NII-CURRENT> 6,207
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (607,902)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13,346)
<NET-ASSETS> 1,806,277
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 139,433
<OTHER-INCOME> 0
<EXPENSES-NET> 22,614
<NET-INVESTMENT-INCOME> 116,819
<REALIZED-GAINS-CURRENT> 6,601
<APPREC-INCREASE-CURRENT> (113,699)
<NET-CHANGE-FROM-OPS> 9,721
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (123,040)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 29,511
<NUMBER-OF-SHARES-REDEEMED> (71,710)
<SHARES-REINVESTED> 8,067
<NET-CHANGE-IN-ASSETS> (377,898)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (614,810)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,100
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,614
<AVERAGE-NET-ASSETS> 225,159
<PER-SHARE-NAV-BEGIN> 7.14
<PER-SHARE-NII> .34
<PER-SHARE-GAIN-APPREC> (.37)
<PER-SHARE-DIVIDEND> (.36)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.75
<EXPENSE-RATIO> 2.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
PER SHARE AND RATIO INFORMATION IS SHOWN AT THE CLASS LEVEL. ALL OTHER
INFORMATION IS COMBINED FOR ALL CLASSES. THIS SCHEDULE CONTAINS SUMMARY
FINANCIAL INFORMATION EXTRACTED FROM THE 1999 ANNUAL REPORT TO
SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000701638
<NAME> KEMPER PORTFOLIOS
<SERIES>
<NUMBER> 053
<NAME> KEMPER U.S. MORTGAGE FUND - CLASS C
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 1,906,140
<INVESTMENTS-AT-VALUE> 1,893,047
<RECEIVABLES> 208,982
<ASSETS-OTHER> 188
<OTHER-ITEMS-ASSETS> 1,978
<TOTAL-ASSETS> 2,104,195
<PAYABLE-FOR-SECURITIES> 288,228
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,690
<TOTAL-LIABILITIES> 297,918
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,421,318
<SHARES-COMMON-STOCK> 495
<SHARES-COMMON-PRIOR> 753
<ACCUMULATED-NII-CURRENT> 6,207
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (607,902)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (13,346)
<NET-ASSETS> 1,806,277
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 139,433
<OTHER-INCOME> 0
<EXPENSES-NET> 22,614
<NET-INVESTMENT-INCOME> 116,819
<REALIZED-GAINS-CURRENT> 6,601
<APPREC-INCREASE-CURRENT> (113,699)
<NET-CHANGE-FROM-OPS> 9,721
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (123,040)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,140
<NUMBER-OF-SHARES-REDEEMED> (1,492)
<SHARES-REINVESTED> 94
<NET-CHANGE-IN-ASSETS> (377,898)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (614,810)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,100
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 22,614
<AVERAGE-NET-ASSETS> 3,895
<PER-SHARE-NAV-BEGIN> 7.15
<PER-SHARE-NII> .37
<PER-SHARE-GAIN-APPREC> (.39)
<PER-SHARE-DIVIDEND> (.38)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.75
<EXPENSE-RATIO> 1.78
</TABLE>
REPORT OF INDEPENDENT AUDITORS
Board of Trustees
Kemper Funds
In planning and performing our audits of the financial statements of each of the
Kemper Funds listed in Exhibit A attached hereto (the "Funds") for the period
ended as of the date listed in Exhibit A attached hereto ("Report Date"), we
considered their internal control, including control activities for safeguarding
securities, in order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on internal control.
The management of the Funds is responsible for establishing and maintaining
internal control. In fulfilling this responsibility, estimates and judgments by
management are required to assess the expected benefits and related costs of
controls. Generally, controls that are relevant to an audit pertain to the
entity's objective of preparing financial statements for external purposes that
are fairly presented in conformity with generally accepted accounting
principles. Those controls include the safeguarding of assets against
unauthorized acquisition, use or disposition.
Because of inherent limitations in internal control, error or fraud may occur
and not be detected. Also, projection of any evaluation of internal control to
future periods is subject to the risk that it may become inadequate because of
changes in conditions or that the effectiveness of the design and operation may
deteriorate.
Our consideration of internal control would not necessarily disclose all matters
in internal control that might be material weaknesses under standards
established by the American Institute of Certified Public Accountants. A
material weakness is a condition in which the design or operation of one or more
of the internal control components does not reduce to a relatively low level the
risk misstatements, error or fraud in amounts that would be material in relation
to the financial statements being audited may occur and not be detected within a
timely period by employees in the normal course of performing their assigned
functions. However, we noted no matters involving internal control and its
operation, including controls for safeguarding securities, that we consider to
be material weaknesses as defined above at Report Date.
This report is intended solely for the information and use of the board of
trustees and management and the Securities and Exchange Commission and is not
intended to be and should not be used by anyone other than these specified
parties.
ERNST & YOUNG LLP
Chicago, Illinois
November 19, 1999
<PAGE>
Kemper Funds
- ------------
Exhibit A
---------
September 30, 1999
- ------------------
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Tax-Exempt California Money Market Fund
Kemper Aggressive Growth Fund
Kemper High Yield Series -
Kemper High Yield Fund
Kemper High Yield Opportunity Fund
Kemper National Tax-Free Income Series -
Kemper Municipal Bond Fund
Kemper Intermediate Municipal Bond Fund
Kemper Portfolios -
Kemper Cash Reserves Fund
Kemper U.S. Mortgage Fund
Kemper Securities Trust -
Kemper U.S. Growth and Income Fund
Kemper Small Cap Relative Value Fund
Kemper Income Trust -
Kemper High Yield II Fund
INVESTMENT MANAGEMENT AGREEMENT
Kemper Portfolios
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
Kemper Cash Reserves Fund
Ladies and Gentlemen:
KEMPER PORTFOLIOS (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 Kemper Cash Reserves Fund (the "Fund"). Series may be abolished and
dissolved, and additional series established, from time to time by action of the
Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue
<PAGE>
Code of 1986, as amended, (the "Code") relating to regulated investment
companies and all rules and regulations thereunder; and all other applicable
federal and state laws and regulations of which you have knowledge; subject
always to policies and instructions adopted by the Trust's Board of Trustees. In
connection therewith, you shall use reasonable efforts to manage the Fund so
that it will qualify as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder. The Fund shall have the benefit of the
investment analysis and research, the review of current economic conditions and
trends and the consideration of long-range investment policy generally available
to your investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust. You shall also make available to the
Trust promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Trust in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends
2
<PAGE>
and distributions available to be paid by the Fund to its shareholders,
preparing and arranging for the printing of dividend notices to shareholders,
and providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .40 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .38 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month
3
<PAGE>
based on the portion of the average of such values in excess of $1,000,000,000
shall be 1/12 of .35 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $2,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $2,500,000,000 shall be 1/12 of .32 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds $5,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $5,000,000,000 shall be 1/12
of .30 of 1 percent of such portion; provided that, for any calendar month
during which the average of such values exceeds $7,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$7,500,000,000 shall be 1/12 of .28 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
10,000,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $10,000,000,000 shall be 1/12 of .26 of 1
percent of such portion; and provided that, for any calendar month during which
the average of such values exceeds 12,500,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$12,500,000,000 shall be 1/12 of .25 of 1 percent of such portion; over (b) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or
4
<PAGE>
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates, provided that nothing in this Agreement
shall be deemed to protect or purport to protect you against any liability to
the Trust, the Fund or its shareholders to which you would otherwise be subject
by reason of willful misfeasance, bad faith or gross negligence in the
performance of your duties, or by reason of your reckless disregard of your
obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until September 30, 1999, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Portfolios"
refers to the Trustees under the Declaration collectively as Trustees and not as
individuals or personally, and that no shareholder of the Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of the Fund to any extent whatsoever, but that the
Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC
5
<PAGE>
by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER PORTFOLIOS, on behalf of
Kemper Cash Reserves Fund
By:
-------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
-------------------------------
Treasurer
6
INVESTMENT MANAGEMENT AGREEMENT
Kemper Portfolios
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
Kemper U.S. Mortgage Fund
Ladies and Gentlemen:
KEMPER PORTFOLIOS (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 Kemper U.S. Mortgage Fund (the "Fund"). Series may be abolished and
dissolved, and additional series established, from time to time by action of the
Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or authenticated
of each of the following additional documents related to the Trust and the Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving
the form of this Agreement.
(d) Establishment and Designation of Series of Shares of
Beneficial Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. Portfolio Management Services. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue
<PAGE>
Code of 1986, as amended, (the "Code") relating to regulated investment
companies and all rules and regulations thereunder; and all other applicable
federal and state laws and regulations of which you have knowledge; subject
always to policies and instructions adopted by the Trust's Board of Trustees. In
connection therewith, you shall use reasonable efforts to manage the Fund so
that it will qualify as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder. The Fund shall have the benefit of the
investment analysis and research, the review of current economic conditions and
trends and the consideration of long-range investment policy generally available
to your investment advisory clients. In managing the Fund in accordance with the
requirements set forth in this section 2, you shall be entitled to receive and
act upon advice of counsel to the Trust. You shall also make available to the
Trust promptly upon request all of the Fund's investment records and ledgers as
are necessary to assist the Trust in complying with the requirements of the 1940
Act and other applicable laws. To the extent required by law, you shall furnish
to regulatory authorities having the requisite authority any information or
reports in connection with the services provided pursuant to this Agreement
which may be requested in order to ascertain whether the operations of the Trust
are being conducted in a manner consistent with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. Administrative Services. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that may arise with respect to the Fund's
operations and consulting with the Fund's independent accountants, legal counsel
and the Fund's other agents as necessary in connection therewith; establishing
and monitoring the Fund's operating expense budgets; reviewing the Fund's bills;
processing the payment of bills that have been approved by an authorized person;
assisting the Fund in determining the amount of dividends
2
<PAGE>
and distributions available to be paid by the Fund to its shareholders,
preparing and arranging for the printing of dividend notices to shareholders,
and providing the transfer and dividend paying agent, the custodian, and the
accounting agent with such information as is required for such parties to effect
the payment of dividends and distributions; and otherwise assisting the Trust as
it may reasonably request in the conduct of the Fund's business, subject to the
direction and control of the Trust's Board of Trustees. Nothing in this
Agreement shall be deemed to shift to you or to diminish the obligations of any
agent of the Fund or any other person not a party to this Agreement which is
obligated to provide services to the Fund.
4. Allocation of Charges and Expenses. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend disbursing
agents and registrars; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; expenses of
preparing share certificates and, except as provided below in this section 4,
other expenses in connection with the issuance, offering, distribution, sale,
redemption or repurchase of securities issued by the Fund; expenses relating to
investor and public relations; expenses and fees of registering or qualifying
Shares of the Fund for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the shipment of
the Fund's portfolio securities; the compensation and all expenses (specifically
including travel expenses relating to Trust business) of Trustees, officers and
employees of the Trust who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio securities
of the Fund; expenses of printing and distributing reports, notices and
dividends to shareholders; expenses of printing and mailing Prospectuses and
SAIs of the Fund and supplements thereto; costs of stationery; any litigation
expenses; indemnification of Trustees and officers of the Trust; and costs of
shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. Management Fee. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of .55 of
1 percent of the average daily net assets as defined below of the Fund for such
month; provided that, for any calendar month during which the average of such
values exceeds $250,000,000 the fee payable for that month based on the portion
of the average of such values in excess of $250,000,000 shall be 1/12 of .52 of
1 percent of such portion; provided that, for any calendar month during which
the average of such values exceeds $1,000,000,000, the fee payable for that
month
3
<PAGE>
based on the portion of the average of such values in excess of $1,000,000,000
shall be 1/12 of .50 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $2,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $2,500,000,000 shall be 1/12 of .48 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds $5,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $5,000,000,000 shall be 1/12
of .45 of 1 percent of such portion; provided that, for any calendar month
during which the average of such values exceeds $7,500,000,000, the fee payable
for that month based on the portion of the average of such values in excess of
$7,500,000,000 shall be 1/12 of .43 of 1 percent of such portion; provided that,
for any calendar month during which the average of such values exceeds
10,000,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $10,000,000,000 shall be 1/12 of .41 of 1
percent of such portion; and provided that, for any calendar month during which
the average of such values exceeds 12,500,000,000, the fee payable for that
month based on the portion of the average of such values in excess of
$12,500,000,000 shall be 1/12 of .40 of 1 percent of such portion; over (b) any
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or investment companies advised by you have available
funds for investment, investments suitable and appropriate for each shall be
allocated in accordance with procedures believed by you to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by you to be equitable. The Fund recognizes that in some cases
this procedure may adversely affect the size of the position that may be
acquired or disposed of
4
<PAGE>
for the Fund.
7. Limitation of Liability of Manager. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. Duration and Termination of This Agreement. This Agreement shall remain in
force until September 30, 1999, and continue in force from year to year
thereafter, but only so long as such continuance is specifically approved at
least annually (a) by the vote of a majority of the Trustees who are not parties
to this Agreement or interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting on such approval, and (b)
by the Trustees of the Trust, or by the vote of a majority of the outstanding
voting securities of the Fund. The aforesaid requirement that continuance of
this Agreement be "specifically approved at least annually" shall be construed
in a manner consistent with the 1940 Act and the rules and regulations
thereunder and any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an instrument in writing
signed by the party against whom enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved in a manner consistent with the 1940 Act and rules and
regulations thereunder and any applicable SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "Kemper Portfolios"
refers to the Trustees under the Declaration collectively as Trustees and not as
individuals or personally, and that no shareholder of the Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of the Fund to any extent whatsoever, but that the
Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. Miscellaneous. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
5
<PAGE>
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
KEMPER PORTFOLIOS, on behalf of
Kemper U.S. Mortgage Fund
By:
---------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
---------------------------
Treasurer
6
