<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
SCUDDER VARIABLE LIFE INVESTMENT FUND
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(Name of Registrant as Specified In Its Charter)
Thomas F. McDonough
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
October , 1998
SCUDDER VARIABLE LIFE INVESTMENT FUND
IMPORTANT NEWS
FOR SCUDDER FUND SHAREHOLDERS
While we encourage you to read the full text of the enclosed Proxy
Statement, here's a brief overview of some matters affecting your Fund that will
be the subject of a shareholder vote.
Q & A: QUESTIONS AND ANSWERS
Q: WHAT IS HAPPENING?
A: Zurich Insurance Company ("Zurich"), which is the majority owner of your
Fund's investment manager, Scudder Kemper Investments, Inc. ("Scudder
Kemper"), has combined its businesses with the financial services businesses
of B.A.T Industries p.l.c. ("B.A.T") The resulting company, Zurich Financial
Services ("Zurich Financial Services"), has become Zurich's parent company.
Although this transaction will have virtually no effect on the operations of
Scudder Kemper or your Fund, we are asking the Fund's shareholders to
approve a new investment management agreement to assure that there is no
interruption in the services Scudder Kemper provides to your Fund. The
following pages give you additional information about Zurich Financial
Services, the new investment management agreement and certain other matters.
THE BOARD MEMBERS OF YOUR FUND, INCLUDING THOSE WHO ARE NOT AFFILIATED WITH
THE FUND, SCUDDER KEMPER OR ZURICH, RECOMMEND THAT YOU VOTE FOR APPROVAL OF
THE NEW INVESTMENT MANAGEMENT AGREEMENT.
Q: WHY AM I BEING ASKED TO VOTE ON THE NEW INVESTMENT MANAGEMENT AGREEMENT?
A: As a result of the Zurich-B.A.T transaction, the former shareholders of
B.A.T indirectly own a 43% interest in Zurich through a new holding company,
Allied Zurich p.l.c.. This change in ownership of Zurich may be deemed to
have caused a "change in control" of Scudder Kemper, even though Scudder
Kemper's operations will not change as a result. The Investment Company Act
of 1940, which regulates investment companies such as your Fund, requires
that fund shareholders approve a new investment management agreement
whenever there is a change in control of a fund's investment manager (even
in the most technical sense). Pursuant to an exemptive order issued by the
Securities and Exchange Commission, your Fund entered into a new investment
management agreement, subject to receipt of shareholder approval within 150
days. Accordingly, we are
<PAGE> 3
seeking shareholder approval of the new investment management agreement with
your Fund.
Q: HOW WILL THE ZURICH-B.A.T TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?
A: We do not expect the transaction to affect you as a Fund shareholder. Your
Fund and your Fund's investment objectives will not change. You will still
own the same shares in the same Fund. The new investment management
agreement is substantially identical to the former investment management
agreement, except for the dates of execution and termination. Similarly, the
other service arrangements between your Fund and Scudder Kemper or
affiliates of Scudder Kemper will not be affected. If shareholders do not
approve the new investment management agreement, the agreement will
terminate and the Board Members of your Fund will take such action as they
deem to be in the best interests of your Fund and its shareholders.
Q: WILL THE INVESTMENT MANAGEMENT FEES INCREASE?
A: No, the investment management fee rates paid by your Fund will remain the
same.
Q: WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A: In order to save your Fund the expense of a subsequent meeting, a vote is
also being sought for a revision of your Fund's fundamental lending policy
to give the Board of your Fund discretionary authority to permit your Fund
to enter into interfund lending arrangements, subject to Securities and
Exchange Commission approval.
Q: HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
A: After careful consideration, the Board Members of your Fund, including those
who are not affiliated with the Fund, Scudder Kemper or Zurich, recommend
that you vote FOR the Proposals on the enclosed proxy card(s).
Q: WILL THE FUND PAY FOR THIS PROXY SOLICITATION?
A: No, Zurich or its affiliates will bear these costs.
Q: WHOM DO I CALL FOR MORE INFORMATION?
A: Please call Shareholder Communications Corporation, your Fund's information
agent, at 1-800-733-8481, ext. 429.
<PAGE> 4
SCUDDER VARIABLE LIFE INVESTMENT FUND
Two International Place
Boston, Massachusetts 02110
October , 1998
Dear Shareholders:
Zurich Insurance Company, the majority owner of Scudder Kemper Investments,
Inc., has combined its businesses with the financial services businesses of
B.A.T Industries p.l.c. The resulting company, Zurich Financial Services, has
become the parent company of Zurich and the majority owner of Scudder Kemper. As
a result of this transaction, we are asking the shareholders of each of the
funds for which Scudder Kemper acts as investment manager, including your Fund,
to approve a new investment management agreement with Scudder Kemper.
The Zurich-B.A.T transaction should not affect you as a Fund shareholder.
Your Fund shares will not change, the advisory fee rates and expenses paid by
your Fund will not increase, the investment objectives of your Fund will remain
the same, and, as is now the case, you will not pay sales loads on purchases of
shares of your Fund.
Shareholders are also being asked to approve certain other matters that
have been set forth in the Notice of Meeting. AFTER CAREFUL REVIEW, THE MEMBERS
OF YOUR FUND'S BOARD HAVE APPROVED THE NEW INVESTMENT MANAGEMENT AGREEMENT. THE
BOARD MEMBERS OF YOUR FUND BELIEVE THAT EACH OF THE PROPOSALS SET FORTH IN THE
NOTICE OF MEETING FOR YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE
ENCLOSED MATERIALS CAREFULLY AND THEN VOTE FOR ALL PROPOSALS.
Because all of the funds for which Scudder Kemper acts as investment
manager are holding shareholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
<PAGE> 5
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s) after a reasonable amount of time, you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote.
Respectfully,
/s/ William M. Thomas
William M. Thomas
President
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
<PAGE> 6
SCUDDER VARIABLE LIFE INVESTMENT FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders (the "Special
Meeting") of each portfolio that is listed on Appendix 1 to the Proxy Statement
(each such portfolio is referred to herein as a "Fund" and, collectively, the
"Funds") of Scudder Variable Life Investment Fund (the "Trust"), will be held at
the offices of Scudder Kemper Investments, Inc., 13th Floor, Two International
Place, Boston, Massachusetts 02110, on December 16, 1998, at 9:00 a.m., Eastern
time, for the following purposes:
PROPOSAL 1: To approve a new investment management agreement for each
Fund with Scudder Kemper Investments, Inc.; and
PROPOSAL 2: To approve of the revision of each Fund's fundamental
lending policy.
The appointed proxies will vote in their discretion on any other business
as may properly come before the Special Meeting or any adjournments thereof.
Holders of record of shares of each Fund at the close of business on
October 19, 1998 are entitled to vote at the Special Meeting and at any
adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve a Proposal is not obtained at the Special Meeting with
respect to one or more Funds, the persons named as proxies may propose one or
more adjournments of the Special Meeting in accordance with applicable law, to
permit further solicitation of proxies. Any such adjournment as to a matter will
require the affirmative vote of the holders of a majority of the concerned
Fund's shares present in person or by proxy at the Special Meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are
<PAGE> 7
entitled to vote in favor of the Proposals and will vote against any such
adjournment those proxies to be voted against the Proposals.
By Order of the Board of Trustees,
/s/ Thomas F. McDonough
Thomas F. McDonough
Secretary
October , 1998
IMPORTANT--WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN IT
IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED FOR
YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) MAY SAVE THE
NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE SPECIAL
MEETING. IF YOU CAN ATTEND THE SPECIAL MEETING AND WISH TO VOTE YOUR SHARES IN
PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 8
SCUDDER VARIABLE LIFE INVESTMENT FUND
Two International Place
Boston, Massachusetts 02110
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of Scudder Variable Life
Investment Fund (the "Trust") for use at the Special Meeting of Shareholders of
the portfolios of the Trust that are listed on Appendix 1 hereto (each such
portfolio is referred to herein as a "Fund" and, collectively, the "Funds"), to
be held at the offices of Scudder Kemper Investments, Inc. ("Scudder Kemper"),
13th Floor, Two International Place, Boston, Massachusetts 02110, on December
16, 1998 at 9:00 a.m., Eastern time, and at any and all adjournments thereof
(the "Special Meeting").
In the descriptions of the Proposals below, the word "fund" is sometimes
used to mean investment companies or series thereof in general, and not the
Funds whose proxy statement this is. In addition, in this Proxy Statement, for
simplicity, actions are described as being taken by a Fund that is a series of
the Trust, although all actions are actually taken by the Trust on behalf of the
applicable series.
This Proxy Statement, the Notice of a Special Meeting and the proxy cards
are first being mailed to shareholders on or about October 19, 1998 or as soon
as practicable thereafter. Any shareholder giving a proxy has the power to
revoke it by mail (addressed to the Secretary at the principal executive office
of the Funds, c/o Scudder Kemper Investments, Inc., at Two International Place,
Boston, Massachusetts 02110) or in person at the Special Meeting, by executing a
superseding proxy or by submitting a notice of revocation to the Fund. All
properly executed proxies received in time for the Special Meeting will be voted
as specified in the proxy or, if no specification is made, in favor of the
Proposals referred to in the Proxy Statement.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of a majority of the shares of a Fund entitled to be cast shall be
necessary and sufficient to constitute a quorum for the transaction of business.
In the event that the necessary quorum to transact business or the vote required
to approve any Proposal is not obtained at the Special Meeting with respect to
one or more Funds, the persons named as proxies may propose one or more
adjournments of the Special Meeting in accordance with applicable law to permit
further solicitation of proxies with respect to the Proposal that did not
receive the vote necessary for its passage or to obtain a quorum. Any such
adjournment as to a matter will require the affirmative vote of the holders of a
majority of the concerned Fund's shares present in person or by proxy at the
Special Meeting. The persons named as proxies will vote in favor of such
adjournment those proxies which they are entitled to vote in favor of that
Proposal and will vote
<PAGE> 9
against any such adjournment those proxies to be voted against that Proposal.
For purposes of determining the presence of a quorum for transacting business at
the Special Meeting, abstentions and broker "non-votes" will be treated as
shares that are present but which have not been voted. Broker non-votes are
proxies received by a Fund from brokers or nominees when the broker or nominee
has neither received instructions from the beneficial owner or other persons
entitled to vote nor has discretionary power to vote on a particular matter.
Accordingly, shareholders are urged to forward their voting instructions
promptly.
Each Proposal requires the affirmative vote of a "majority of the
outstanding voting securities" of a Fund. The term "majority of the outstanding
voting securities," as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), and as used in this Proxy Statement, means: the affirmative
vote of the lesser of (1) 67% of the voting securities of each Fund present at
the meeting if more than 50% of the outstanding voting securities of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding voting
securities of each Fund.
Abstentions will have the effect of a "no" vote on each Proposal. Broker
non-votes will have the effect of a "no" vote on each Proposal, each of which
requires the approval of a specified percentage of the outstanding shares of
each Fund, if such vote is determined on the basis of obtaining the affirmative
vote of more than 50% of the outstanding voting securities of the Fund. Broker
non-votes will not constitute "yes" or "no" votes, and will be disregarded in
determining the voting securities "present" if such vote is determined on the
basis of the affirmative vote of 67% of the voting securities of the Fund
present at the Special Meeting with respect to each Proposal.
Shares of the Funds are offered only to insurance companies (each an
"Insurance Company") to fund benefits under their variable annuity contracts and
variable life insurance policies (each a "Contract"). Accordingly, as of the
Record Date (as defined below), shares of each of the Funds were held by
separate accounts, or sub-accounts thereof, of various Insurance Companies.
These shares are owned by the Insurance Companies as depositors for their
respective Contracts issued to individual contract holders or to a group (e.g.,
a defined benefit plan) in which individuals participate (collectively,
"Participants"). Under the terms of the Contracts, Participants have the right
to instruct the Insurance Companies on how to vote the shares related to their
interests through their Contracts (i.e., pass-through voting). An Insurance
Company must vote the shares of the Funds held in its name as directed. If an
Insurance Company does not receive voting instructions for all of the shares of
a particular Fund held under the Contracts, it may vote all of the shares in the
relevant separate accounts with respect to each proposal on which it is entitled
to vote, for, against or abstaining, in the same proportion as the shares of
that Fund for which it has received instructions (i.e., echo voting). The group
Participants of some group Contracts may have the right to direct the vote, with
respect to each
<PAGE> 10
proposal on which they are entitled to vote, for all shares of a particular Fund
held under the Contract, for, against or abstaining, in the same proportions as
shares for which instructions have been given under the same Contract. This
Proxy Statement is used to solicit instructions from Participants for voting
shares of the Funds as well as for soliciting proxies from the Insurance
Companies, the actual shareholders of the Funds. All persons entitled to direct
the voting of shares, whether or not they are shareholders, will be described as
voting for purposes of this Proxy Statement.
Shareholders of each Fund will vote separately with respect to each
Proposal.
Holders of record of the shares of each Fund at the close of business on
October 19, 1998 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. The table provided in Appendix 2 hereto sets forth the number
of shares outstanding for each Fund as of June 30, 1998.
Appendix 3 sets forth the beneficial owners of at least 5% of a Fund's
shares. To the best of the Trust's knowledge, as of June 30, 1998, no person
owned beneficially more than 5% of any Fund's outstanding shares, except as
stated in Appendix 3.
Appendix 4 hereto sets forth the number of shares of each Fund owned
directly or beneficially by the Trustees of the Board.
Each Fund provides periodic reports to all of its shareholders which
highlight relevant information, including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for each Fund and a copy of any more recent semi-annual report, without
charge, by calling 800-225-5163 or writing the Fund, c/o Scudder Kemper
Investments, Inc., at Two International Place, Boston, Massachusetts 02110.
PROPOSAL 1: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder Kemper acts as the investment manager to each Fund pursuant to
investment management agreements entered into by each Fund and Scudder Kemper.
The investment management agreement in effect between each Fund and Scudder
Kemper prior to the consummation of the transaction between Zurich Insurance
Company ("Zurich") and B.A.T Industries p.l.c. ("B.A.T") (the "Zurich-B.A.T
Transaction" or the "Transaction"), which is described below, is referred to in
this Proxy Statement as a "Former Investment Management Agreement,"
collectively, the "Former Investment Management Agreements." The investment
management agreement currently in effect between each Fund and Scudder Kemper
was executed as of the consummation of the
<PAGE> 11
Zurich-B.A.T Transaction and is referred to in this Proxy Statement as a "New
Investment Management Agreement," collectively, the "New Investment Management
Agreements" and, together with the Former Investment Management Agreements, the
"Investment Management Agreements." (Scudder Kemper is sometimes referred to in
this proxy statement as the "Investment Manager.")
On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder"), entered into
an agreement with Zurich pursuant to which Scudder and Zurich agreed to form an
alliance. On December 31, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc. ("Kemper"), a Zurich subsidiary, became part
of Scudder. Scudder's name was changed to Scudder Kemper Investments, Inc. The
transaction between Scudder and Zurich (the "Scudder-Zurich Transaction")
resulted in the termination of each Fund's investment management agreement with
Scudder. Consequently, the Former Investment Management Agreement between each
Fund and Scudder Kemper was approved by the Trust's Board and by each Fund's
shareholders.
The Zurich-B.A.T Transaction. On December 22, 1997, Zurich and B.A.T
entered into a definitive agreement (the "Merger Agreement") pursuant to which
businesses of Zurich (including Zurich's almost 70% ownership interest in
Scudder Kemper) were to be combined with the financial services businesses of
B.A.T. On October 12, 1997, Zurich and B.A.T had confirmed that they were
engaged in discussions concerning a possible business combination; on October
16, 1997, Zurich and B.A.T announced that they had entered into an Agreement in
Principle, dated as of October 15, 1997 (the "Agreement in Principle") to merge
B.A.T's financial services businesses with Zurich's businesses. The Merger
Agreement superseded the Agreement in Principle.
In order to effect this combination, Zurich and B.A.T first reorganized
their respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services business
from its tobacco-related businesses by spinning off to its shareholders a new
British company, Allied Zurich p.l.c., which held B.A.T's financial services
businesses.
Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich
p.l.c. contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services ("Zurich Financial Services"), in each case
in exchange for shares of Zurich Financial Services. These transactions were
completed on September 7, 1998. As a result, upon the completion of the
Transaction, the former Zurich shareholders initially became the owners (through
Zurich Allied AG) of 57% of the voting stock of Zurich Financial Services, and
former B.A.T shareholders became the owners (through Allied Zurich p.l.c.) of
43% of the voting stock of Zurich Financial Services. Zurich Financial Services
now owns Zurich and the financial services businesses previously owned by B.A.T.
<PAGE> 12
Below is a simplified chart showing the corporate structure of Zurich
Financial Services after these transactions:
[FLOW CHART RE: ALLIED ZURICH AND ZURICH ALLIED]
Corporate Governance. At the closing of the Zurich-B.A.T Transaction, the
parties entered into a Governing Agreement that establishes the corporate
governance structure for Zurich Allied AG, Allied Zurich p.l.c. and Zurich
Financial Services.
The Board of Directors of Zurich Financial Services consists of ten
members, five of whom were initially selected by Zurich and five by B.A.T. Mr.
Rolf Huppi, Zurich's Chairman and Chief Executive Officer, became Chairman and
<PAGE> 13
Chief Executive Officer of Zurich Financial Services. In addition to his vote by
virtue of his position on the Board of Directors, as Chairman, Mr. Huppi will
have a tie-breaking vote on all matters except recommendations of the Audit
Committee, recommendations of the Remuneration Committee in respect of the
remuneration of the Chairman and the CEO, appointment and removal of the
Chairman and CEO, appointments to the Nominations, Audit and Remuneration
Committees and nominations to the Board of Directors not made through the
Nominations Committee.
The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the 11 initial
members of the Group Management Board, eight were members of the Corporate
Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of Scudder
Kemper, who is responsible for Global Asset Management for Zurich Financial
Services), and three were B.A.T executives.
The Board of Directors of Zurich Allied AG initially consists of 11
members, eight of whom were Zurich directors and three of whom were proposed by
B.A.T. The Board of Directors of Allied Zurich p.l.c. also initially consists of
11 members, eight of whom were B.A.T directors and three of whom were proposed
by Zurich. The parties have agreed that, as soon as possible, the Boards of
Directors of Zurich Financial Services, Zurich Allied AG and Allied Zurich
p.l.c. will have identical membership.
Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.
The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich p.l.c. shareholders in the event of a takeover bid for
either company.
The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include: the Farmers Group
of Insurance companies; the Eagle Star Insurance business, primarily in the
U.K.; Allied-Dunbar, one of the leading U.K. unit-linked life insurance and
pensions companies; and Threadneedle Asset Management, which was formed
initially to manage the investment assets of Eagle Star and Allied-Dunbar, and
which, at December 31, 1997, had $58.8 billion under management. Overall, at
year-end 1997, the financial services businesses of B.A.T had $79 billion in
assets under management, including $18 billion in third party assets.
Zurich has informed the Funds that the financial services businesses of
B.A.T do not include any of B.A.T's tobacco businesses and that, after careful
review, Zurich has concluded that the tobacco-related liabilities connected with
B.A.T's tobacco business should not adversely affect Zurich or the present
Zurich subsidiaries, including Scudder Kemper.
<PAGE> 14
Governance arrangements that were put in place at the time of the
acquisition of Zurich's 70% interest in Scudder Kemper (which are discussed
below under "Investment Manager") remain unaffected by the Transaction. These
arrangements preclude the making of certain major decisions affecting Scudder
Kemper without the approval of Scudder Kemper directors elected by the
non-Zurich shareholders of Scudder Kemper.
Consummation of the Zurich-B.A.T Transaction may be deemed to have
constituted an "assignment," as that term is defined in the 1940 Act, of each
Fund's Former Investment Management Agreement with Scudder Kemper. As required
by the 1940 Act, each of the Former Investment Management Agreements provided
for its automatic termination in the event of its assignment. Accordingly, a New
Investment Management Agreement between each Fund and Scudder Kemper was
approved by the Board members of each Fund and are now being proposed for
approval by shareholders of each Fund. Scudder Kemper has received an exemptive
order from the Securities and Exchange Commission (the "SEC" or the
"Commission") permitting each Fund to obtain shareholder approval of its New
Investment Management Agreement within 150 days after the consummation of the
Transaction, which occurred on September 7, 1998 (and, consequently, within 150
days after the termination of its Former Investment Management Agreement),
instead of before the consummation of the Transaction. Pursuant to the exemptive
order, each Fund's investment management fees are being held in escrow until the
earlier of shareholder approval of the Fund's New Investment Management
Agreement or the expiration of the 150 day period. A copy of the master form of
the New Investment Management Agreement is attached hereto as Exhibit A. THE NEW
INVESTMENT MANAGEMENT AGREEMENT FOR EACH FUND IS SUBSTANTIALLY IDENTICAL TO THE
CORRESPONDING FORMER INVESTMENT MANAGEMENT AGREEMENT, EXCEPT FOR THE DATES OF
EXECUTION AND TERMINATION. In addition, the portfolio managers for each Fund
will not change as a result of the Transaction. The material terms of the
Investment Management Agreements are described under "Description of the
Investment Management Agreements" below.
BOARD'S RECOMMENDATION
On August 12, 1998, the Board of the Trust met and the Board members of the
Trust, including the Board Members who are not parties to such agreement or
"interested persons" (as defined under the 1940 Act) (the "Non-Interested
Trustees" or "Non-Interested Board members") of any such party, voted to approve
the New Investment Management Agreements and to recommend approval to the
shareholders of each applicable Fund.
For information about the Board's deliberations and the reasons for their
recommendation, please see "Board's Evaluation" below.
<PAGE> 15
BOARD'S EVALUATION
The Non-Interested Board members of the Trust have been aware of the
proposed Zurich-B.A.T Transaction since the announcement of the Agreement in
Principle on October 16, 1997. The Board members of the Trust were kept informed
by Scudder Kemper of significant subsequent developments regarding the
Transaction, including the execution of the Merger Agreement on December 22,
1997 and the receipt of necessary regulatory approvals.
In the course of the annual review by the Non-Interested Board members of
the continuance of the investment management agreements between each Fund and
Scudder Kemper, Scudder Kemper furnished the Board members with detailed
information regarding the proposed Transaction, including information provided
to the shareholders of Zurich and B.A.T and information regarding the structure
of the Transaction, the resulting ownership and governance arrangements of
Zurich and the investment management business of B.A.T expected to be acquired
by Scudder Kemper following completion of the Transaction. The Non-Interested
Board members had the opportunity to consider this information with the
assistance of their independent counsel and to ask questions of Scudder Kemper
representatives. In the course of these deliberations, Scudder Kemper advised
the Non-Interested Board members that the proposed Transaction would not have a
material effect on the operations of the Funds or on their shareholders.
During the course of their deliberations, the Non-Interested Trustees
considered a variety of factors, including the nature, quality and extent of the
services furnished by Scudder Kemper to the Funds; the necessity of Scudder
Kemper's maintaining and enhancing its ability to retain and attract capable
personnel to serve the Funds; the increased complexity of the domestic and
international securities markets; the investment record of Scudder Kemper in
managing the Funds; Scudder Kemper's profitability with respect to the Funds and
the other investment companies managed by Scudder Kemper before marketing
expenses paid by Scudder Kemper; possible economies of scale; comparative data
as to investment performance, advisory fees and expense ratios; Scudder Kemper's
expenditures in developing worthwhile and innovative shareholder services for
the Funds; improvements in the quality and scope of the shareholder services
provided to the Funds' shareholders; the advantages and possible disadvantages
to the Funds of having an adviser of the Funds which also serves other
investment companies as well as other accounts; possible benefits to Scudder
Kemper from serving as adviser and from affiliates of Scudder Kemper serving as
principal underwriter, transfer agent and fund accounting agent of the Funds;
current and developing conditions in the financial services industry, including
the entry into the industry of large and well capitalized companies which are
spending and appear to be prepared to continue to spend substantial sums to
engage personnel and to provide services to competing investment companies; the
financial resources of Scudder Kemper and the continuance of appropriate
incentives to assure that Scudder Kemper
<PAGE> 16
will continue to furnish high quality services to the Funds; and various other
factors. The Non-Interested Board members of the Trust considered the foregoing
factors with respect to each of the applicable Funds.
The Board of the Trust was advised that Zurich intends to rely on Section
15(f) of the 1940 Act, which provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of the investment adviser's
affiliated persons (as defined under the 1940 Act) to receive any amount or
benefit in connection with a change in control of the investment adviser so long
as two conditions are met. First, for a period of three years after the
transaction, at least 75% of the board members of the investment company must
not be "interested persons" of the investment company's investment adviser or
its predecessor adviser. On or prior to the consummation of the Transaction, the
Board was in compliance with this provision of Section 15(f). Second, an "unfair
burden" must not be imposed upon the investment company as a result of such
transaction or any express or implied terms, conditions or understandings
applicable thereto. The term "unfair burden" is defined in Section 15(f) to
include any arrangement during the two-year period after the transaction whereby
the investment adviser, or any interested person of any such adviser, receives
or is entitled to receive any compensation, directly or indirectly, from the
investment company or its shareholders (other than fees for bona fide investment
advisory or other services) or from any person in connection with the purchase
or sale of securities or other property to, from or on behalf of the investment
company (other than bona fide ordinary compensation as principal underwriter for
such investment company). No such compensation agreements are contemplated in
connection with the Transaction. Zurich or its affiliates will pay the costs of
preparing and distributing proxy materials to, and of holding the meeting of,
the Funds' shareholders as well as other fees and expenses in connection with
the Transaction, including the fees and expenses of legal counsel and
consultants to the Funds and the Non-Interested Trustees.
In addition to the foregoing factors, the Non-Interested Trustees gave
careful consideration to the likely impact of the Transaction on the Scudder
Kemper organization. In this regard, the Non-Interested Trustees considered,
among other things, the fact that the Transaction does not appear to alter in
any material respect the substantial autonomy afforded to Scudder Kemper
executives over Scudder Kemper's operations, the equity participation and
incentives for many Scudder Kemper employees, or Zurich's strategy for the
development of its asset management business through Scudder Kemper. Based on
the foregoing, the Non-Interested Trustees concluded that the Transaction should
cause no reduction in the quality of services provided to the Funds and believe
that the Transaction should enhance Scudder Kemper's capabilities and strengths.
<PAGE> 17
DESCRIPTION OF THE INVESTMENT MANAGEMENT AGREEMENTS
Except as disclosed below, all Former and New Investment Management
Agreements are substantially identical. Under the Investment Management
Agreements, Scudder Kemper provides each Fund with continuing investment
management services. The Investment Manager also determines which securities
should be purchased, held, or sold, and what portion of each Fund's assets
should be held uninvested, subject to the Trust's Charter, By-Laws, investment
policies and restrictions, the provisions of the 1940 Act, and such policies and
instructions as the Trustees may have determined.
Each Investment Management Agreement provides that the Investment Manager
will provide portfolio management services, place portfolio transactions in
accordance with policies expressed in each Fund's registration statement, pay
each Fund's office rent, and render significant administrative services on
behalf of each Fund (not otherwise provided by third parties) necessary for each
Fund's operating as an open-end investment company, including, but not limited
to, preparing reports to and meeting materials for the Trust's Board and reports
and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of
various third-party and affiliated service providers to each Fund (such as each
Fund's transfer and pricing agents, fund accounting agent, custodian,
accountants and others) and other persons in any capacity deemed necessary or
desirable to Fund operations; preparing and making filings with 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 each
Fund's 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 returns pursuant to Section 4982 of the Internal Revenue Code of
1986, as amended; 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 each Fund all books, records and reports and any other
information required under the 1940 Act, to the extent such books, records and
reports and other information are not maintained by each Fund's custodian or
other agents of each Fund; assisting in establishing accounting policies of each
Fund; assisting in the resolution of accounting issues that may arise with
respect to each Fund's operations and consulting with each Fund's independent
accountants, legal counsel and 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 each Fund in determining the amount
of dividends and distributions available to be paid by each Fund to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing
<PAGE> 18
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 each Fund in the conduct of
its business, subject to the direction and control of the Trust's Board.
Each Investment Management Agreement also provides that the Investment
Manager is not required to pay any expenses of any activity primarily intended
to result in the sale of Fund securities if and to the extent that (i) the
expenses are to be borne by a principal underwriter acting as the distributor;
or (ii) the Fund has adopted a Rule 12b-1 Plan providing for the assumption of
some or all of those expenses. Under each Investment Management Agreement, each
Fund is responsible for other expenses, including organizational expenses
(including out-of-pocket expenses, but not including the Investment Manager's
overhead or employee costs); brokers' commissions or other costs of acquiring or
disposing of any portfolio securities of each Fund; legal, auditing and
accounting expenses; payment for portfolio pricing or valuation services to
pricing agents, accountants, bankers and other specialists, if any; taxes and
governmental fees; the fees and expenses of each Fund's transfer agent; expenses
of preparing share certificates and any other expenses, including clerical
expenses, of issuance, offering, distribution, sale, redemption or repurchase of
shares; the expenses of and fees for registering or qualifying securities for
sale; the fees and expenses of Non-Interested Trustees; the cost of printing and
distributing reports, notices and dividends to current shareholders; and the
fees and expenses of each Fund's custodians, subcustodians, accounting agent,
dividend disbursing agents and registrars. Each Fund may arrange to have third
parties assume all or part of the expenses of sale, underwriting and
distribution of shares of each Fund. Each Fund is also responsible for expenses
of shareholders' and other meetings and its expenses incurred in connection with
litigation and the legal obligation it may have to indemnify officers and
Trustees of the Trust with respect thereto. Each Fund is also responsible for
the maintenance of books and records which are required to be maintained by each
Fund's custodian or other agents of the Trust; telephone, telex, facsimile,
postage and other communications expenses; any fees, dues and expenses incurred
by each Fund in connection with membership in investment company trade
organizations; expenses of printing and mailing prospectuses and statements of
additional information of each Fund and supplements thereto to current
shareholders; costs of stationery; fees payable to the Investment Manager and to
any other Fund advisors or consultants; expenses relating to investor and public
relations; interest charges, bond premiums and other insurance expense; freight,
insurance and other charges in connection with the shipment of each Fund's
portfolio securities; and other expenses.
The Investment Manager is responsible for the payment of the compensation
and expenses of all Trustees, officers and executive employees of each Fund
(including each Fund's share of payroll taxes) affiliated with the and making
available, without expense to each Fund, the services of such Trustees, 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. Each
<PAGE> 19
Fund is responsible for the fees and expenses (specifically including travel
expenses relating to Fund business) of Trustees not affiliated with the
Investment Manager. Under each Investment Management Agreement, the Investment
Manager also pays each Fund's share of payroll taxes, as well as expenses, such
as travel expenses (or an appropriate portion thereof), of Trustees and officers
of the Trust who are directors, officers or employees of the Investment Manager,
except to the extent that such expenses relate to attendance at meetings of the
Board of the Trust, or any committees thereof or advisers thereto, held outside
Boston, Massachusetts or New York, New York. During each Fund's most recent
fiscal year, no compensation, direct or otherwise (other than through fees paid
to the Investment Manager), was paid or became payable by the Trust to any of
its officers or Trustees who were affiliated with the Investment Manager.
In return for the services provided by the Investment Manager as investment
manager and the expenses it assumes under each Investment Management Agreement,
each Fund pays the Investment Manager a management fee which is accrued daily
and payable monthly. The management fee rate for each Fund under the Investment
Management Agreements is set forth in Appendix 5 hereto. As of the end of each
Fund's last fiscal year, each Fund had net assets and paid an aggregate
management fee to the Investment Manager during such period as also set forth in
Appendix 5 hereto.
Each Investment Management Agreement further provides that the Investment
Manager shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with matters to which such agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Manager in the performance of its
duties or from reckless disregard by the Investment Manager of its obligations
and duties under such agreement. Each Investment Management Agreement also
provides that purchase and sale opportunities, which are suitable for more than
one client of the Investment Manager, will be allocated by the Investment
Manager in an equitable manner. In addition, each Investment Management
Agreement identifies Scudder Kemper as the exclusive licensee of the rights to
use and sublicense the names "Scudder," "Scudder Kemper Investments, Inc.," and
"Scudder, Stevens & Clark, Inc." (together the "Scudder Marks"). Under this
license, the Trust, with respect to each of its Funds, if any, has the non-
exclusive right to use and sublicense the Scudder name and marks as part of its
name, and to use the Scudder Marks in the Trust's investment products and
services. This license continues only as long as the Investment Management
Agreement or any other investment advisory agreement is in place, and only as
long as Scudder Kemper continued to be a licensee of the Scudder Marks from
Scudder Trust Company, which is the owner and licensor of the Scudder Marks. As
a condition of the license, the Trust, on behalf of each of its Funds, if any,
undertakes certain responsibilities and agrees to certain restrictions, such as
agreeing not to challenge the validity of the Scudder Marks or ownership by
Scudder Trust Company and the obligation to use the name within commercially
<PAGE> 20
reasonable standards of quality. In the event the agreement is terminated, the
Trust, on behalf of each of its Funds, if any, must not use a name likely to be
confused with those associated with the Scudder Marks. Lastly, each Investment
Management Agreement contains a provision stating that it supersedes all prior
agreements.
Each Investment Management Agreement may be terminated without penalty upon
sixty (60) days' written notice by either party. Each Fund may agree to
terminate its Investment Management Agreement either by the vote of a majority
of the outstanding voting securities of the Fund, or by a vote of the Board. As
stated above, each Investment Management Agreement automatically terminates in
the event of its assignment.
Scudder Kemper or one of its predecessors has acted as the Investment
Manager for each Fund since each Fund commenced operations as shown in Appendix
6 hereto. Also shown in Appendix 6 is the date of each Former Investment
Management Agreement, the date when each Former Investment Management Agreement
was last approved by the shareholders of each Fund, the date when each New
Investment Management Agreement was last approved by the Trustees and the date
to which each New Investment Management Agreement was last continued. Each
Former Investment Management Agreement was last submitted to shareholders prior
to its becoming effective, as required by the 1940 Act, in connection with the
Scudder-Zurich Transaction.
THE NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreement for each Fund is dated the date of
the consummation of the Transaction, which occurred on September 7, 1998. Each
New Investment Management Agreement will be in effect for an initial term ending
on September 30, 1999, and may continue thereafter from year to year only if
specifically approved at least annually by the vote of "a majority of the
outstanding voting securities" of each Fund, or by the Board and, in either
event, the vote of a majority of the Non-Interested Trustees, cast in person at
a meeting called for such purpose. In the event that shareholders of a Fund do
not approve the New Investment Management Agreement, it will terminate. In such
event, each Board will take such action as it deems to be in the best interests
of the Fund and its shareholders.
DIFFERENCES BETWEEN THE FORMER AND NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreements are substantially identical to the
Former Investment Management Agreements, except for the dates of execution and
termination.
<PAGE> 21
INVESTMENT MANAGER
Scudder Kemper, which resulted from the combination of the businesses of
Scudder and Kemper, an indirect subsidiary of Zurich, in connection with the
Scudder-Zurich Transaction, is one of the largest and most experienced
investment counsel firms in the United States. Scudder was established in 1919
as a partnership and was restructured as a Delaware corporation in 1985. Scudder
launched its first fund in 1928. Kemper launched its first fund in 1948. Since
December 31, 1997, Scudder Kemper has served as investment adviser to both
Scudder and Kemper funds. As of , 1998, Scudder Kemper has more than
$ billion in assets under management. The principal source of Scudder Kemper's
income is professional fees received from providing continuing investment
advice. Scudder Kemper provides investment counsel for many individuals and
institutions, including insurance companies, endowments, industrial corporations
and financial and banking organizations.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich owns approximately 70% of the Investment Manager, with the
balance owned by the Investment Manager's officers and employees.
As stated above, Scudder Kemper is a Delaware corporation. Rolf Huppi* is
the Chairman of the Board and Director, Edmond D. Villani(#) is the President,
Chief Executive Officer and Director, Stephen R. Beckwith(#) is the Treasurer
and Chief Financial Officer, Kathryn L. Quirk(#) is the General Counsel, Chief
Compliance Officer and Secretary, Lynn S. Birdsong(#) is a Corporate Vice
President and Director, Cornelia M. Small(#) is a Corporate Vice President and
Director, Laurence Cheng* is a Director and Marcus Rohrbasser* is a Director of
the Investment Manager. The principal occupation of each of Edmond D. Villani,
Stephen R. Beckwith, Kathryn L. Quirk, Lynn S. Birdsong and Cornelia M. Small is
serving as a Managing Director of the Investment Manager; the principal
occupation of each of Rolf Huppi and Marcus Rohrbasser is serving as an officer
of Zurich; the principal occupation of Laurence Cheng is serving as a senior
partner of Capital Z Partners, an investment fund. The Executive Committee
members are Messrs. Birdsong, Cheng, Rohrbasser and Villani (Chairman).
The outstanding voting securities of the Investment Manager are held of
record 36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of
Zurich; 32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich;
- ------------------------------
* Mythenquai 2, Zurich Switzerland.
(#) 345 Park Avenue, New York, New York
<PAGE> 22
20.86% by Stephen R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M.
Small and Edmond D. Villani, in their capacity as representatives (the
"Management Representatives") of the Investment Manager's management holders and
retiree holders pursuant to a Second Amended and Restated Security Holders
Agreement (the "Security Holders Agreement") among the Investment Manager,
Zurich, ZHCA, ZKIH, the Management Representatives, the management holders, the
retiree holders and Edmond D. Villani, as trustee of Scudder Kemper Investments,
Inc. Executive Defined Contribution Plan Trust (the "Plan Trust"); and 9.66% by
the Plan Trust. There are no outstanding non-voting securities of the Investment
Manager.
In connection with the Scudder-Zurich Transaction (described above),
pursuant to which Zurich acquired a two-thirds interest in Scudder for $866.7
million in cash in December, 1997, Daniel Pierce, a Trustee of the Trust, sold
85.4% of his holdings in Scudder to Zurich for cash.
Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of the
Investment Manager consists of four directors designated by ZHCA and ZKIH and
three directors designated by Management Representatives.
The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating Scudder
Kemper, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of Scudder Kemper, rights of
Zurich to repurchase Scudder Kemper stock upon termination of employment of
Scudder Kemper personnel, and registration rights for stock held by stockholders
of Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of Scudder Kemper from time to time may
enter into transactions with various banks, including each Fund's custodian
bank. It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of Scudder
Kemper, computes net asset value for each Fund. Scudder Service Corporation
("SSC"), also a subsidiary of Scudder Kemper, is the transfer, shareholder
servicing and dividend-paying agent for the shares of each Fund. The table
<PAGE> 23
provided in Appendix 7 sets forth for each Fund the respective fees paid to
SFAC. SSC receives no fees from any Fund.
SFAC and SSC will continue to provide fund accounting and transfer agency
to the Funds, as described above, under the current arrangements if the New
Investment Management Agreements are approved.
Exhibit B sets forth (as of each fund's last fiscal year end, unless
otherwise noted) the fees and other information regarding investment companies
advised by Scudder Kemper that have similar investment objectives to any of the
Funds. (See Appendix 5 for information regarding the management fee rate, net
assets and aggregate management fee paid for each Fund.)
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder Kemper places orders for portfolio
transactions through Scudder Investor Services, Inc. ("SIS"), Two International
Place, Boston, Massachusetts 02110, which in turn places orders on behalf of the
Funds with issuers, underwriters or other brokers and dealers. SIS is a
corporation registered as a broker/dealer and a subsidiary of Scudder Kemper. In
selecting brokers and dealers with which to place portfolio transactions for a
Fund, Scudder Kemper will not consider sales of shares of funds currently
advised by Scudder Kemper as a decision-making factor, although it may place
such transactions with brokers and dealers that sell shares of funds currently
advised by Scudder Kemper. When it can be done consistently with the policy of
obtaining the most favorable net results, Scudder Kemper may place such orders
with brokers and dealers who supply research, market and statistical information
to a Fund or to Scudder Kemper. SIS does not receive any commissions, fees or
other remuneration from the Funds for this service. Allocation of portfolio
transactions is supervised by Scudder Kemper.
THE BOARD MEMBERS OF THE TRUST RECOMMEND THAT THE SHAREHOLDERS OF EACH
FUND VOTE IN FAVOR OF THIS PROPOSAL 1.
PROPOSAL 2: APPROVAL OF THE REVISION
OF EACH FUND'S FUNDAMENTAL LENDING POLICY
This Proposal seeks shareholder approval of a change to each Fund's
fundamental lending policy. The 1940 Act requires an investment company to adopt
policies with respect to certain activities, including the making of loans by
the fund, which can be changed only by a shareholder vote (i.e.,"fundamental"
policies). The proposed change would permit each Fund to engage in lending in a
manner and to the extent permitted by applicable law. The proposed change would,
therefore, permit each Fund, subject to the receipt of any necessary regulatory
approval and Board authorization, to enter into lending arrangements, including
lending agreements under which the funds advised by Scudder
<PAGE> 24
Kemper could for temporary purposes lend money directly to and borrow money
directly from each other through a credit facility ("Interfund Lending
Arrangements"). Each of the Funds believes that the flexibility provided by this
policy change could possibly reduce substantially the Fund's borrowing costs and
enhance its ability to earn higher rates of interest on short-term lendings in
the event that the Board determines that such arrangements are warranted in
light of the Fund's circumstances. Certain other fund groups have obtained the
exemptive relief necessary to permit the funds to engage in lending and
borrowing among the funds advised by the same adviser. Approval of the revision
to each Fund's lending policy requires the affirmative vote of a majority of the
outstanding voting securities, as defined above, of that Fund. If the
shareholders of any Fund fail to approve the proposed fundamental policy, that
Fund's current policy will remain in effect. The Board members of the Trust
recommend that the shareholders of each Fund vote in favor of the Proposal. The
proposed change to each Fund's fundamental lending policy is discussed in detail
below.
LENDING POLICY
The current policy of each Fund prohibits the making of loans, except loans
of portfolio securities and to the extent the entry into repurchase agreements
and the purchase of debt securities or interests in indebtedness in accordance
with the Fund's investment objectives and policies are deemed to be loans. The
proposed policy, unlike the current policy, does not specify the particular
types of lending in which each Fund is permitted to engage; instead, the
proposed policy permits each Fund to lend only in a manner and to an extent in
accordance with applicable law. Accordingly, each Fund's fundamental lending
policy would be revised as follows (with additions to the policy underscored and
deletions to the policy struck through):
As a matter of fundamental policy, the Fund may not 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. to other persons, except
(i) loans of portfolio securities, and (ii) to the extent that
entry into repurchase agreements and the purchase of debt
instruments or interests to indebtedness in accordance with the
Fund's investment objectives and policies may be deemed to be
loans.
DISCUSSION
Management believes that there may be advantages to these Interfund Lending
Arrangements as compared with other arrangements currently in place for some of
the Funds. Currently, some of the Funds, in effect, lend money to banks and
broker-dealers by entering into repurchase agreements or purchasing other
short-term instruments. Other Funds borrow money from the same or other banks
for temporary purposes to satisfy redemption requests or to cover
<PAGE> 25
other unanticipated cash shortfalls. Many of the Funds have entered into
uncommitted lines of credit with banks under which the banks may, but are not
required to, lend money to the Funds to meet the Funds' temporary cash needs. If
a Fund were to borrow money from a bank under its current line of credit
agreement, the Fund would pay interest on the borrowed cash at a rate that would
be significantly higher than the rate that would be earned by other (non-
borrowing) Funds on investments in repurchase agreements and other short-term
instruments of the same maturity as the bank loan. The Funds believe this
differential represents the bank's profit for serving as "middleman" between
borrower and lender. Other bank loan arrangements, such as committed lines of
credit into which certain Funds have entered, require the Funds to pay
substantial commitment fees in addition to the interest rate to be paid by the
borrowing Fund.
The 1940 Act generally prohibits one fund from lending money or other
property to or borrowing money or other property from another fund having the
same investment adviser (currently, in order to be able to participate in these
lending or borrowing arrangements, a fund must first receive an exemptive order
from the SEC). If the revised policy is adopted, the Board would have discretion
to request an order from the SEC to permit the Funds to enter into Interfund
Lending Arrangements consistent with their respective investment objectives and
policies. Each Fund's current borrowing policy would permit the Fund to engage
in the contemplated Interfund Lending Arrangements; thus no corresponding
revision of that policy is being sought. Each Fund currently has a non-
fundamental policy, which may be changed without a shareholder vote, limiting
borrowings in certain circumstances that, unless changed by Board action,
restrict a Fund's ability to borrow through Interfund Lending Arrangements. The
Funds anticipate that the Interfund Lending Arrangements may provide a borrowing
Fund with savings when the Fund's cash position is insufficient to meet
temporary cash requirements arising, for example, when redemptions exceed
anticipated volumes. When a Fund is forced to liquidate portfolio securities to
meet redemption requests, the proceeds of which are normally paid the next day
after receipt of the request immediately, the Fund often does not receive
payment in settlement for up to three days (or longer, when a Fund sells foreign
securities). The Interfund Lending Arrangements would provide a source of
immediate, short-term liquidity pending settlement of the sale of portfolio
securities. In addition, Funds making short-term cash loans directly to other
Funds would earn interest at a higher rate than they otherwise could obtain from
investing their cash through repurchase agreements. Although Interfund Lending
Arrangements may reduce the Funds' borrowing costs, enhance their ability to
earn higher rates of interest on short-term lendings, and substantially reduce
the Funds' need to borrow from banks, the Funds may also continue to maintain
uncommitted or committed lines of credit or other borrowing arrangements with
banks as an added measure of safety and liquidity.
THE BOARD MEMBERS OF THE TRUST RECOMMEND THAT THE SHAREHOLDERS OF EACH FUND VOTE
IN FAVOR OF THIS PROPOSAL 2.
<PAGE> 26
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy card and
proxy statement and all other costs incurred in connection with the solicitation
of proxies, including any additional solicitation made by letter, telephone or
telegraph, will be paid by Zurich or its affiliates. In addition to solicitation
by mail, certain officers and representatives of the Trust, officers and
employees of Scudder Kemper and certain financial services firms and their
representatives, who will receive no extra compensation for their services, may
solicit proxies by telephone, telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Special Meeting date approaches, certain
shareholders of each Fund may receive a telephone call from a representative of
SCC if their votes have not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from shareholders of each Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The Trustees believe that these procedures are reasonably designed to
ensure that the identity of the shareholder casting the vote is accurately
determined and that the voting instructions of the shareholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card, and ask for the shareholder's instructions on
the Proposals. The SCC representative, although he or she is permitted to answer
questions about the process, is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the proxy
statement. SCC will record the shareholder's instructions on the card. Within 72
hours, the shareholder will be sent a letter or mailgram to confirm his or her
vote and asking the shareholder to call SCC immediately if his or her
instructions are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Special Meeting, but does not
wish to give a proxy by telephone, the shareholder may still submit the proxy
card originally sent with the proxy statement or attend in person. Should
shareholders require additional information regarding the proxy or replacement
proxy cards, they may contact SCC toll-free at 1-800-733-8481, ext. 429. Any
proxy given by a shareholder, whether in writing or by telephone, is revocable
until voted at the Special Meeting.
<PAGE> 27
PROPOSALS OF SHAREHOLDERS
Shareholders wishing to submit proposals for inclusion in a proxy statement
for a shareholder meeting subsequent to the Special Meeting, if any, should send
their written proposals to the Secretary of the Trust, c/o Scudder Kemper
Investments, Inc., at Two International Place, Boston, Massachusetts 02110,
within a reasonable time before the solicitation of proxies for such meeting.
The timely submission of a proposal does not guarantee its inclusion.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
No Board Member is aware of any matters that will be presented for action
at the Special Meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the accompanying
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any such other matters in accordance with their best judgment in the interest of
the Trust and/or each Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
[Thomas F. McDonough signature]
Thomas F. McDonough
Secretary
<PAGE> 28
EXHIBIT A
MASTER FORM OF
NEW INVESTMENT MANAGEMENT AGREEMENT
SEPTEMBER 7, 1998
Scudder Kemper Investments, Inc.
Two International Place
Boston, Massachusetts 02110
INVESTMENT MANAGEMENT AGREEMENT
[NAME OF PORTFOLIO]
Ladies and Gentlemen:
Scudder Variable Life Investment Fund (the "Fund") has been established as
a Massachusetts business trust to engage in the business of an investment
company. Pursuant to the Fund's Declaration of Trust, as amended from time-to-
time (the "Declaration"), the Board of Trustees has divided the Fund's shares of
beneficial interest, without par value, (the "Shares") into separate series, or
funds, including [Name of Portfolio] (the "Portfolio"). Series may be abolished
and dissolved, and additional series established, from time to time by action of
the Trustees.
The Fund, on behalf of the Portfolio, has selected you to act as the sole
investment manager of the Portfolio 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 Fund on behalf of the
Portfolio agrees with you as follows:
1. Delivery of Documents. The Fund engages in the business of
investing and reinvesting the assets of the Portfolio 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 Portfolio
included in the Fund's Registration Statement on Form N-1A, as amended from
time to time, (the "Registration Statement") filed by the Fund 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 Fund. The Fund has
also furnished you with copies properly certified or authenticated of each
of the following additional documents related to the Fund and the
Portfolio:
(a) The Declaration dated December 11, 1997, as amended to date.
A-1
<PAGE> 29
(b) By-Laws of the Fund as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Fund and the shareholders of
the Portfolio selecting you as investment manager and approving the form
of this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest dated __________ relating to the Portfolio.
The Fund 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. Sublicense to Use the Scudder Trademarks. As exclusive licensee
of the rights to use and sublicense the use of the "Scudder," "Scudder
Kemper Investments, Inc." and "Scudder, Stevens & Clark, Inc." trademarks
(together, the "Scudder Marks"), you hereby grant the Fund a nonexclusive
right and sublicense to use (i) the "Scudder" name and mark as part of the
Fund's name (the "Portfolio Name"), and (ii) the Scudder Marks in
connection with the Fund's investment products and services, in each case
only for so long as this Agreement, any other investment management
agreement between you and the Fund, or any extension, renewal or amendment
hereof or thereof remains in effect, and only for so long as you are a
licensee of the Scudder Marks, provided however, that you agree to use your
best efforts to maintain your license to use and sublicense the Scudder
Marks. The Fund agrees that it shall have no right to sublicense or assign
rights to use the Scudder Marks, shall acquire no interest in the Scudder
Marks other than the rights granted herein, that all of the Fund's uses of
the Scudder Marks shall inure to the benefit of Scudder Trust Company as
owner and licensor of the Scudder Marks (the "Trademark Owner"), and that
the Fund shall not challenge the validity of the Scudder Marks or the
Trademark Owner's ownership thereof. The Fund further agrees that all
services and products it offers in connection with the Scudder Marks shall
meet commercially reasonable standards of quality, as may be determined by
you or the Trademark Owner from time to time, provided that you acknowledge
that the services and products the Fund rendered during the one-year period
preceding the date of this Agreement are acceptable. At your reasonable
request, the Fund shall cooperate with you and the Trademark Owner and
shall execute and deliver any and all documents necessary to maintain and
protect (including but not limited to in connection with any trademark
infringement action) the Scudder Marks and/or enter the Fund as a
registered user thereof. At such time as this Agreement or any other
investment management agreement shall no longer be in effect between you
(or your successor) and the Fund, or you no longer are a licensee of the
Scudder Marks, the Fund shall (to the extent that, and as soon as, it
lawfully can) cease to use the Portfolio Name or any
A-2
<PAGE> 30
other name indicating that it is advised by, managed by or otherwise
connected with you (or any organization which shall have succeeded to your
business as investment manager) or the Trademark Owner. In no event shall
the Fund use the Scudder Marks or any other name or mark confusingly
similar thereto (including, but not limited to, any name or mark that
includes the name "Scudder") if this Agreement or any other investment
advisory agreement between you (or your successor) and the Portfolio is
terminated.
3. Portfolio Management Services. As manager of the assets of the
Portfolio, you shall provide continuing investment management of the assets
of the Portfolio 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 Fund's Board of Trustees. In connection
therewith, you shall use reasonable efforts to manage the Portfolio so that
it will qualify as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder. The Portfolio 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 Portfolio in accordance with the requirements set forth in
this section 3, you shall be entitled to receive and act upon advice of
counsel to the Fund or counsel to you. You shall also make available to the
Fund promptly upon request all of the Portfolio's investment records and
ledgers as are necessary to assist the Fund 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 Fund 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
Portfolio and place orders with broker-dealers, foreign currency dealers,
futures commission merchants or others pursuant to your determinations and
all in accordance with Portfolio policies as expressed in the Registration
Statement. You shall determine what portion of the Portfolio's portfolio
shall be invested in securities and other assets and what portion, if any,
should be held uninvested.
A-3
<PAGE> 31
You shall furnish to the Fund's Board of Trustees periodic reports on
the investment performance of the Portfolio and on the performance of your
obligations pursuant to this Agreement, and you shall supply such
additional reports and information as the Fund's officers or Board of
Trustees shall reasonably request.
4. Administrative Services. In addition to the portfolio management
services specified above in section 3, you shall furnish at your expense
for the use of the Portfolio such office space and facilities in the United
States as the Portfolio may require for its reasonable needs, and you (or
one or more of your affiliates designated by you) shall render to the Fund
administrative services on behalf of the Portfolio 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 Fund's Board of Trustees and reports and notices
to Portfolio 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 Portfolio 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 Portfolio's transfer agent; assisting in the
preparation and filing of the Portfolio's federal, state and local tax
returns; preparing and filing the Portfolio'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 Portfolio under applicable federal and state
securities laws; maintaining or causing to be maintained for the Portfolio
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 Portfolio's custodian or other agents
of the Portfolio; assisting in establishing the accounting policies of the
Portfolio; assisting in the resolution of accounting issues that may arise
with respect to the Portfolio's operations and consulting with the
Portfolio's independent accountants, legal counsel and the Portfolio's
other agents as necessary in connection therewith; establishing and
monitoring the Portfolio's operating expense budgets; reviewing the
Portfolio's bills; processing the payment of bills that have been approved
by an authorized person; assisting the Portfolio in determining the amount
of dividends and distributions available to be paid by the Portfolio to its
shareholders, preparing and arranging for the printing of dividend notices
to shareholders, and providing the transfer
A-4
<PAGE> 32
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 Fund as it may
reasonably request in the conduct of the Portfolio's business, subject to
the direction and control of the Fund'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 Portfolio or any other person not a party to this
Agreement which is obligated to provide services to the Portfolio.
5. Allocation of Charges and Expenses. Except as otherwise
specifically provided in this section 5, you shall pay the compensation and
expenses of all Trustees, officers and executive employees of the Fund
(including the Portfolio's share of payroll taxes) who are affiliated
persons of you, and you shall make available, without expense to the
Portfolio, the services of such of your directors, officers and employees
as may duly be elected officers of the Fund, 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 3
hereof and the administrative services described in section 4 hereof.
You shall not be required to pay any expenses of the Portfolio other
than those specifically allocated to you in this section 5. 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 Portfolio's Trustees and officers as are directors, officers or
employees of you whose services may be involved, for the following expenses
of the Portfolio: organization expenses of the Portfolio (including
out-of-pocket expenses, but not including your overhead or employee costs);
fees payable to you and to any other Portfolio advisors or consultants;
legal expenses; auditing and accounting expenses; maintenance of books and
records which are required to be maintained by the Portfolio's custodian or
other agents of the Fund; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and
expenses incurred by the Portfolio in connection with membership in
investment company trade organizations; fees and expenses of the
Portfolio's accounting agent, 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 5, other expenses in connection with the
issuance, offering, distribution, sale, redemption or repurchase of
securities issued by the Portfolio; expenses relating to investor and
public relations; expenses and fees of registering or qualifying Shares of
the Portfolio for sale; interest charges, bond premiums and other insurance
expense; freight, insurance and other charges in connection with the
shipment of the Portfolio's portfolio securities; the compensation and all
expenses (specifically including travel expenses relating to Fund business)
of Trustees, officers and
A-5
<PAGE> 33
employees of the Fund who are not affiliated persons of you; brokerage
commissions or other costs of acquiring or disposing of any portfolio
securities of the Portfolio; expenses of printing and distributing reports,
notices and dividends to shareholders; expenses of printing and mailing
Prospectuses and SAIs of the Portfolio and supplements thereto; costs of
stationery; any litigation expenses; indemnification of Trustees and
officers of the Fund; costs of shareholders' and other meetings; and travel
expenses (or an appropriate portion thereof) of Trustees and officers of
the Fund who are directors, officers or employees of you to the extent that
such expenses relate to attendance at meetings of the Board of Trustees of
the Fund or any committees thereof or advisors thereto held outside of
Boston, Massachusetts or New York, New York.
You shall not be required to pay expenses of any activity which is
primarily intended to result in sales of Shares of the Portfolio 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 Portfolio's Shares
pursuant to an underwriting agreement which provides that the underwriter
shall assume some or all of such expenses, or (ii) the Fund on behalf of
the Portfolio shall have adopted a plan in conformity with Rule 12b-1 under
the 1940 Act providing that the Portfolio (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 Portfolio (or some other party) pursuant to
such a plan.
6. Management Fee. For all services to be rendered, payments to be
made and costs to be assumed by you as provided in sections 3, 4 and 5
hereof, the Fund on behalf of the Portfolio 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 __________ percent of the average daily net assets as
defined below of the Portfolio for such month over any compensation waived
by you from time to time (as more fully described below). You shall be
entitled to receive during any month such interim payments of your fee
hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the
Portfolio and unpaid.
The "average daily net assets" of the Portfolio shall mean the average
of the values placed on the Portfolio's net assets as of 4:00 p.m. (New
York time) on each day on which the net asset value of the Portfolio is
determined consistent with the provisions of Rule 22c-1 under the 1940 Act
or, if the Portfolio 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 Portfolio 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
A-6
<PAGE> 34
the purposes of this section 6, the value of the net assets of the
Portfolio 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 Portfolio's portfolio may be lawfully
determined on that day. If the Portfolio 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 6.
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 Portfolio's
expenses, as if such waiver or limitation were fully set forth herein.
7. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other
investments for the account of the Portfolio, 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 Portfolio's account with brokers or dealers selected by
you in accordance with Portfolio 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 Portfolio, you shall act
solely as investment counsel for such clients and not in any way on behalf
of the Portfolio.
Your services to the Portfolio 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
Fund. Whenever the Portfolio and one or more other accounts or investment
companies advised by the Manager have available funds for investment,
investments suitable and appropriate for each shall be allocated in
accordance with procedures believed by the Manager to be equitable to each
entity. Similarly, opportunities to sell securities shall be allocated in a
manner believed by the Manager to be equitable. The Portfolio recognizes
that in some cases this procedure may adversely affect the size of the
position that may be acquired or disposed of for the Portfolio.
8. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Fund 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 Portfolio 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 Fund, the Portfolio or its shareholders to which you
would otherwise be subject by reason of willful misfeasance, bad faith or
gross
A-7
<PAGE> 35
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder. Any person, even though
also employed by you, who may be or become an employee of and paid by the
Portfolio shall be deemed, when acting within the scope of his or her
employment by the Portfolio, to be acting in such employment solely for the
Portfolio and not as your employee or agent.
9. 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 Fund, or by the
vote of a majority of the outstanding voting securities of the Portfolio.
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 Portfolio at any
time, without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Portfolio or by the Fund's Board of
Trustees on 60 days' written notice to you, or by you on 60 days' written
notice to the Fund. This Agreement shall terminate automatically in the
event of its assignment.
10. 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.
11. 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
"Scudder Variable Life Investment Fund" refers to the Trustees under the
Declaration collectively as Trustees and not as individuals or personally,
and that no shareholder of the Portfolio, or Trustee, officer, employee or
agent of the Fund, shall be subject to claims against or obligations of the
Fund or of the Portfolio to any extent whatsoever, but that the Fund 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 Fund on behalf of the Portfolio pursuant to this Agreement shall be
A-8
<PAGE> 36
limited in all cases to the Portfolio and its assets, and you shall not
seek satisfaction of any such obligation from the shareholders or any
shareholder of the Portfolio or any other series of the Fund, or from any
Trustee, officer, employee or agent of the Fund. You understand that the
rights and obligations of each Portfolio, or series, under the Declaration
are separate and distinct from those of any and all other series.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
In interpreting the provisions of this Agreement, the definitions contained
in Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Portfolio 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 Fund on behalf of the Portfolio.
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 Fund, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
SCUDDER VARIABLE LIFE INVESTMENT
FUND, on behalf of
[Name of Portfolio]
By:
---------------------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
---------------------------------------------
Managing Director
A-9
<PAGE> 37
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS NOT INCLUDED IN THIS PROXY STATEMENT AND
ADVISED BY SCUDDER KEMPER INVESTMENTS, INC.
SCUDDER FUNDS+
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
MONEY MARKET FUNDS
Government Money Market High level of current income 0.250% of net assets++ $ 83,870,139
Series consistent with preservation
of capital and liquidity.
Money Market Series High level of current income 0.250% of net assets++ $1,041,528,715
consistent with preservation
of capital and liquidity.
Scudder Cash Investment Trust Stability of capital while 0.500% to $250 million $1,182,012,567
maintaining liquidity of 0.450% next $250 million
capital and providing current 0.400% next $500 million
income. 0.350% thereafter++
Scudder U.S. Treasury Money Safety, liquidity, and 0.500% of net assets++ $ 388,528,203
Fund stability of capital and,
consistent therewith, current
income.
U.S. INCOME FUNDS
Scudder Corporate Bond Fund A high level of current income 0.650% of net assets N/A**
through investment primarily
in investment-grade corporate
debt securities.
Scudder GNMA Fund High current income primarily 0.650% to $200 million $ 392,444,820
from U.S. Government 0.600% next $300 million
guaranteed mortgage-backed 0.550% thereafter
Ginnie Mae securities.
Scudder High Yield Bond Fund A high level of current income 0.700% of net assets++ $ 176,221,237
and, secondarily, capital
appreciation through
investment primarily in below
investment-grade domestic debt
securities.
Scudder Income Fund A high level of income, 0.650% to $200 million $ 695,255,717
consistent with the prudent 0.600% next $300 million
investment of capital, through 0.550% thereafter
a flexible investment program
emphasizing high-grade bonds.
Scudder Short Term Bond Fund High level of income 0.600% to $500 million $1,165,531,162
consistent with a high degree 0.500% next $500 million
of principal stability by 0.450% next $500 million
investing primarily in high 0.400% next $500 million
quality short-term bonds 0.375% next $1 billion
0.350% thereafter
Scudder Zero Coupon 2000 Fund As high an investment return 0.600% of net assets++ $ 20,453,972
over a selected period as is
consistent with investment in
U.S. Government securities and
the minimization of
reinvestment risk.
</TABLE>
B-1
<PAGE> 38
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
GLOBAL INCOME FUNDS
Scudder Emerging Markets High current income and, 1.000% of net assets $ 323,628,082
Income Fund secondarily, long term capital
appreciation by investing
primarily in high-yielding
debt securities issued by
governments and corporations
in emerging markets.
Scudder Global Bond Fund Total return with an emphasis 0.750% to $1 billion $ 135,113,465
on current income by investing 0.700% thereafter++
primarily in high-grade bonds
denominated in foreign
currencies and the U.S.
dollar. As a secondary
objective, the Fund will seek
capital appreciation.
Scudder International Bond Income primarily by investing 0.850% to $1 billion $ 145,818,767
Fund in a managed portfolio of 0.800% thereafter++
high-grade international bonds
and, secondarily, protection
and possible enhancement of
principal value by actively
managing currency, bond market
and maturity exposure and by
security selection.
ASSET ALLOCATION FUNDS
Scudder Pathway Balanced Balance of growth and income There will be no fee as $ 192,145,173
Portfolio by investing in a mix of the Manager will receive
Scudder money market, bond and a fee from the
equity mutual funds. underlying funds.
Scudder Pathway Conservative Current income and, There will be no fee as $ 16,971,681
Portfolio secondarily, long term growth the Manager will receive
of capital by investing a fee from the
substantially in Scudder bond underlying funds.
mutual funds, but will have
some exposure to Scudder
equity mutual funds.
Scudder Pathway Growth Long term growth of capital by There will be no fee as $ 49,574,256
Portfolio investing predominantly in the Manager will receive
Scudder equity mutual funds a fee from the
designed to provide long term underlying funds.
growth.
Scudder Pathway International Maximize total return, There will be no fee as $ 11,728,045
Portfolio consisting of capital the Manager will receive
appreciation plus dividend a fee from the
income and interest by underlying funds.
investing in a select mix of
established international and
global Scudder Funds.
U.S. GROWTH AND INCOME FUNDS
Scudder Balanced Fund A balance of growth and income 0.700% of net assets++ $ 158,711,908
from a diversified portfolio
of equity and fixed-income
securities and long term
preservation of capital
through a quality-oriented
investment approach designed
to reduce risk.
</TABLE>
B-2
<PAGE> 39
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
Scudder Dividend & Growth High current income and long 0.750% of net assets N/A**
Fund term growth of capital through
investment in income paying
equity securities.
Scudder Growth and Income Long term growth of capital, 0.600% to $500 million $6,833,584,122
Fund current income and growth of 0.550% next $500 million
income. 0.500% next $500 million
0.475% next $500 million
0.450% next $1 billion
0.425% next $1.5 billion
0.405% next 1.5 billion
0.3875% next $4 billion
0.370% over $10 billion*
U.S. GROWTH FUNDS
Classic Growth Fund Long term growth of capital 0.700% of net assets++ $ 53,225,783
with reduced share price
volatility compared to other
growth mutual funds.
Scudder 21st Century Growth Long term growth of capital by 1.000% of net assets++ $ 23,296,176
Fund investing primarily in the
securities of emerging growth
companies poised to be leaders
in the 21st century.
Scudder Development Fund Long term growth of capital by 1.000% to $500 million $ 845,405,075
investing primarily in 0.950% next $500 million
securities of small and medium 0.900% thereafter
size growth companies.
Scudder Financial Services Long term growth of capital by 0.750% of net assets++ $ 36,926,469@
Fund investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Scudder Health Care Fund Long term growth of capital by 0.850% of next assets++ $ 40,923,873@
investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Scudder Large Company Growth Long term growth of capital 0.700% of net assets $ 288,064,975
Fund (formerly Scudder through investment primarily
Quality Growth Fund) in the equity securities of
seasoned, financially strong
U.S. growth companies.
Scudder Large Company Value Maximize long term capital 0.750% to $500 million $2,212,733,138
Fund (formerly Scudder appreciation through a value 0.650% next $500 million
Capital Growth Fund) driven investment program. 0.600% next $500 million
0.550% next $500 million
0.500% next $1.0 billion*
Scudder Micro Cap Fund Long term growth of capital by 0.750% of net assets $ 91,627,404
investing primarily in a
diversified portfolio of U.S.
micro-cap common stocks.
Scudder Real Estate Long term capital growth and 0.800% of net assets++ $ 20,435,489
Investment Fund current income by investing
primarily in equity securities
of companies in the real
estate industry.
</TABLE>
B-3
<PAGE> 40
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
Scudder S&P 500 Index Fund Investment results that, 0.100% of net assets++ $ 16,912,276
before expenses, correspond to
the total return of common
stocks publicly traded in the
United States, as represented
by the Standard & Poor's 500
Composite Stock Price Index.
Scudder Small Company Value Long term growth of capital by 0.750% of net assets $ 123,398,822
Fund investing primarily in
undervalued stocks of small
U.S. companies.
Scudder Technology Fund Long term growth of capital by 0.850% of net assets++ $ 37,159,344@
investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Value Fund Long term growth of capital 0.700% to $500 million $ 297,979,779
through investment in 0.650% over $500
undervalued equity securities. million*
GLOBAL GROWTH FUNDS
Global Discovery Fund Above-average capital 1.100% of net assets $ 349,121,954
appreciation over the long
term by investing primarily in
the equity securities of small
companies located throughout
the world.
Scudder Emerging Markets Long term growth of capital 1.25% of net assets++ $ 219,624,481
Growth Fund primarily through equity
investment in emerging markets
around the globe.
Scudder Global Fund Long term growth of capital 1.000% to $500 million $1,766,207,742
through a diversified 0.950% next $500 million
portfolio of marketable 0.900% next $500 million
securities, primarily equity 0.850% over $1.5 billion
securities, including common
stock, preferred stocks and
debt securities convertible
into common stocks.
Scudder Gold Fund Maximum return (principal 1.000% of net assets $ 132,131,545
change and income) consistent
with investing in a portfolio
of gold-related equity
securities and gold.
Scudder Greater Europe Growth Long term growth of capital 1.00% to $1 billion $ 195,514,335
Fund through investments primarily 0.90% thereafter*
in the equity securities of
European companies.
Scudder International Fund Long term growth of capital 0.900% to $500 million $2,884,919,345
primarily from foreign equity 0.850% next $500 million
securities. 0.800% next $1 billion
0.750% next $1 billion
0.700% thereafter
Scudder International Growth Long term growth of capital 1.000% of net assets++ $ 48,880,164
and Income Fund and current income primarily
from foreign equity
securities.
</TABLE>
B-4
<PAGE> 41
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
Scudder International Growth Long term capital appreciation 1.000% of net assets N/A**
Fund through investment primarily
in the equity securities of
foreign companies with high
growth potential.
Scudder International Value Long term capital appreciation 1.000% of net assets N/A**
Fund through investment primarily
in undervalued foreign equity
securities.
Scudder Latin America Fund Long term capital appreciation 1.250% to $1 billion $ 882,555,049
through investment primarily 1.150% thereafter
in the securities of Latin
American issuers.
Scudder Pacific Opportunities Long term growth of capital 1.100% of net assets $ 147,276,692
Fund primarily through investment
in the equity securities of
Pacific Basin companies,
excluding Japan.
The Japan Fund, Inc. Long term capital appreciation 0.850% to $100 million $ 265,181,931
through investment primarily 0.750% next $200 million
in equity securities, 0.700% next $300 million
(including American Depository 0.650% thereafter
Receipts of Japanese
companies).
CLOSED-END FUNDS
The Argentina Fund, Inc. Long term capital appreciation Adviser: $ 135,327,320
through investment primarily 1.100% of net assets
in equity securities of Sub-Adviser:
Argentine issuers. Paid by Adviser. 0.100%
of net assets
The Brazil Fund, Inc. Long term capital appreciation 1.200% to $150 million $ 429,429,751
through investment primarily 1.050% next $150 million
in equity securities of 1.000% next $200 million
Brazilian issuers. 0.900% thereafter
Administrator: Receives
an annual fee of $50,000
The Korea Fund, Inc. Long term capital appreciation Adviser: $ 406,244,000
through investment primarily 1.150% to $50 million
in equity securities of Korean 1.100% next $50 million
companies. 1.000% next $250 million
0.950% next $400 million
0.900% thereafter
Sub-Adviser -- Daewoo:
Paid by Adviser.
0.2875% to $50 million
0.275% next $50 million
0.250% next $250 million
0.2375% next $400
million
0.225% thereafter
Montgomery Street Income High level of current income 0.500% to $150 million $ 207,315,702
Securities, Inc. consistent with prudent 0.450% next $50 million
investment risks through a 0.400% thereafter
diversified portfolio
primarily of debt securities.
</TABLE>
B-5
<PAGE> 42
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
Scudder Global High Income High level of current income 1.200% of net assets $ 80,721,844
Fund, Inc. (formerly The and, secondarily, capital
Latin America Dollar Income appreciation through
Fund, Inc.) investment principally in
dollar-denominated Latin
American debt instruments.
Scudder New Asia Fund, Inc. Long term capital appreciation 1.250% to $75 million $ 98,866,168
through investment primarily 1.150% next $125 million
in equity securities of Asian 1.100% thereafter
companies.
Scudder New Europe Fund, Inc. Long term capital appreciation 1.250% to $75 million $ 320,293,393
through investment primarily 1.150% next $125 million
in equity securities of 1.100% thereafter
companies traded on smaller or
emerging European markets and
companies Inc. that are viewed
as likely to benefit from
changes and developments
throughout Europe.
Scudder Spain and Portugal Long term capital appreciation Adviser: $ 112,909,567
Fund, Inc. through investment primarily 1.000% of net assets
in equity securities of Administrator:
Spanish & Portuguese issuers. 0.200% of net assets
AARP FUNDS
AARP Balanced Stock and Bond Long term capital growth and 0.350% to $2 billion $ 638,356,257
Fund income, consistent with a 0.330% next $2 billion
share price more stable than 0.300% next $2 billion
other balanced mutual funds, 0.280% next $2 billion
through investment in a 0.260% next $3 billion
combination of stocks, bonds 0.250% next $3 billion
and cash reserves. 0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of net assets
AARP Bond Fund for Income High level of current income, 0.350% to $2 billion $ 58,324,146
consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
long term bond mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in investment-grade debt 0.250% next $3 billion
securities. 0.240% thereafter++
INDIVIDUAL FUND FEE
0.280% of net assets
AARP Capital Growth Fund Long term capital growth, 0.350% to $2 billion $1,228,379,954
consistent with a share price 0.330% next $2 billion
more stable than other growth 0.280% next $2 billion
funds, through investment in a 0.260% next $3 billion
combination of common stocks 0.250% next $3 billion
and securities convertible 0.240% thereafter
into common stocks. INDIVIDUAL FUND FEE
0.320% of net assets
AARP Diversified Growth Long term growth of capital There will be no fee as $ 61,796,818
Portfolio through investment primarily the manager will receive
in AARP stock mutual funds. a fee
</TABLE>
B-6
<PAGE> 43
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
AARP Diversified Income with Current income with modest There will be no fee as $ 43,446,418
Growth Portfolio long term appreciation through the manager will receive
investment primarily in AARP a fee
bond mutual funds.
AARP Global Growth Fund Long term capital growth, 0.350% to $2 billion $ 148,029,373
consistent with a share price 0.330% next $2 billion
more stable than other global 0.300% next $2 billion
funds, through investment 0.280% next $2 billion
primarily in common stocks of 0.260% next $3 billion
established corporations in a 0.250% next $3 billion
wide variety of developed 0.240% thereafter
countries. INDIVIDUAL FUND FEE
0.550% of net assets
AARP GNMA and U.S. Treasury High level of current income, 0.350% to $2 billion $4,583,980,460
Fund consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
GNMA mutual funds, through 0.280% next $2 billion
investment primarily in high 0.260% next $3 billion
quality U.S. Government- 0.250% next $3 billion
guaranteed GNMA securities and 0.240% thereafter
U.S. Treasury obligations. INDIVIDUAL FUND FEE
0.120% of net assets
AARP Growth and Income Fund Long term capital growth and 0.350% to $2 billion $6,606,012,897
income, consistent with a 0.330% next $2 billion
share price more stable than 0.300% next $2 billion
other growth and income mutual 0.280% next $2 billion
funds, through investment 0.260% next $3 billion
primarily in common stocks 0.250% next $3 billion
with above-average dividend 0.240% thereafter
yields and securities INDIVIDUAL FUND FEE
convertible into common 0.190% of net assets
stocks.
AARP High Quality Short Term High level of current income, 0.350% to $2 billion $ 454,869,518
Bond Fund consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
short-term bond mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in a portfolio of high 0.250% next $3 billion
quality, short-term 0.240% thereafter
securities. INDIVIDUAL FUND FEE
0.190% of net assets
AARP High Quality Money Fund Current income consistent with 0.350% to $2 billion $ 471,310,867
maintaining stability and 0.330% next $2 billion
safety of principal and a 0.300% next $2 billion
constant net asset value of 0.280% next $2 billion
$1.00 per share while offering 0.260% next $3 billion
liquidity, through investment 0.250% next $3 billion
in high quality securities. 0.240% thereafter
INDIVIDUAL FUND FEE
0.100% of net assets
</TABLE>
B-7
<PAGE> 44
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE ASSETS
---- --------- -------- ------
<S> <C> <C> <C>
AARP High Quality Tax Free Current income free from 0.350% to $2 billion $ 102,613,893
Money Fund federal income taxes 0.330% next $2 billion
consistent with maintaining 0.300% next $2 billion
stability and safety of 0.280% next $2 billion
principal and a constant net 0.260% next $3 billion
asset value of $1.00 per share 0.250% next $3 billion
while offering liquidity, 0.240% thereafter
through investment in INDIVIDUAL FUND FEE
high-quality municipal 0.100% of net assets
securities.
AARP Insured Tax Free General High level of current income 0.350% to $2 billion $1,712,008,168
Bond Fund free from federal income 0.330% next $2 billion
taxes, consistent with greater 0.300% next $2 billion
share price stability than 0.280% next $2 billion
other insured tax-free general 0.260% next $3 billion
bond mutual funds, through 0.250% next $3 billion
investment primarily in high 0.240% thereafter
quality municipal securities INDIVIDUAL FUND FEE
covered by insurance. 0.190% of net assets
AARP International Growth and Long term capital growth, 0.350% to $2 billion $ 20,259,062
Income Fund consistent with a share price 0.330% next $2 billion
more stable than other 0.300% next $2 billion
international mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in a diversified portfolio of 0.250% next $3 billion
foreign common stocks with 0.240% thereafter++
above-average dividend yields INDIVIDUAL FUND FEE
and foreign securities 0.600% of net assets
convertible into common
stocks.
AARP Small Company Stock Fund Long term growth of capital, 0.350% to $2 billion $ 50,271,473
consistent with a share price 0.330% next $2 billion
more stable than other small 0.300% next $2 billion
company stock mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in common stocks of small U.S. 0.250% next $3 billion
companies. 0.240% thereafter++
INDIVIDUAL FUND FEE
0.550% of net assets
AARP U.S. Stock Index Fund Long term capital growth and 0.350% to $2 billion $ 38,085,073
income, consistent with 0.330% next $2 billion
greater share price stability 0.300% next $2 billion
than an S&P 500 Index mutual 0.280% next $2 billion
fund, by taking an indexing 0.260% next $3 billion
approach to investing in 0.250% next $3 billion
common stocks, emphasizing 0.240% thereafter++
higher dividend stocks while INDIVIDUAL FUND FEE
maintaining investment 0.000% of net assets
characteristics otherwise
similar to the S&P 500 Index.
</TABLE>
- ------------------------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
++ Subject to waivers and/or expense limitations.
* The addition of this breakpoint is effective 9/30/98.
** Fee information is not available for Scudder Dividend & Growth Fund, which
commenced operations on June 1, 1998; Scudder Corporate Bond Fund, which
commenced operations on August 31, 1998; or Scudder International Growth
Fund and Scudder International Value Fund, each of which commenced
operations on September 1, 1998.
@ Net asset information is provided for the semi-annual period ended May 31,
1998.
B-8
<PAGE> 45
KEMPER FUNDS+
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
EQUITY/GROWTH STYLE FUNDS
Kemper Aggressive Growth Capital appreciation through 0.650% of net assets $ 11,609,000
Fund the use of aggressive plus or minus an
investment techniques. incentive fee based on
the performance of the
Standard & Poor's 500
Stock Index, which may
result in a fee ranging
from 0.450 of 1.000% to
0.850 of 1.000% of net
assets
Kemper Blue Chip Fund Growth of capital and income. 0.580% to $250 million $ 446,891,000
0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Growth Fund Growth of capital through 0.580% to $250 million $2,827,565,000
professional management and 0.550% next $750 million
diversification of investment 0.530% next $1.5 billion
securities having potential 0.510% next $2.5 billion
for capital appreciation. 0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Quantitative Equity Growth of capital and 0.580% to $250 million $ 11,217,000
Fund reduction of risk through 0.550% next $750 million
professional management of a 0.530% next $1.5 billion
diversified portfolio of 0.510% next $2.5 billion
equity securities. 0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Small Capitalization Maximum capital appreciation. 0.650% of net assets $1,095,478,000
Equity Fund plus or minus an
incentive fee based on
the performance of the
Standard & Poor's 500
Stock Index, which may
result in a fee ranging
from 0.350 of 1.000% to
0.950 of 1.000% of net
assets
Kemper Technology Fund Growth of capital. 0.580% to $250 million $1,209,723,000
0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
</TABLE>
B-9
<PAGE> 46
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Kemper Total Return Fund The highest total return, a 0.580% to $250 million $3,241,383,000
combination of income and 0.550% next $750 million
capital gain, consistent with 0.530% next $1.5 billion
reasonable risk. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Value + Growth Fund Growth of capital through 0.720% to $250 million $ 97,741,000
professional management of 0.690% next $750 million
growth and value stocks. 0.660% next $1.5 billion
0.640% next $2.5 billion
0.600% next $2.5 billion
0.580% next $2.5 billion
0.560% next $2.5 billion
0.540% thereafter
EQUITY/VALUE STYLE FUNDS
Kemper Contrarian Fund Long-term capital 0.750% to $250 million $ 178,115,000
appreciation and, 0.720% next $750 million
secondarily, current income. 0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Small Cap Relative Long-term capital 0.750% to $250 million N/A*
Value Fund appreciation. 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter**
Kemper Small Cap Value Fund Long-term capital 0.750% to $250 million $1,263,144,000
appreciation 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper U.S. Growth and Long-term growth of capital, 0.600% to $250 million $ 3,864,000***
Income Fund current income and growth of 0.570% next $750 million
income. 0.550% next $1.5 billion
0.530% thereafter
Kemper-Dreman Financial Long-term capital 0.750% to $250 million N/A*
Services Fund appreciation by investing 0.720% next $750 million
primarily in common stocks 0.700% next $1.5 billion
and other equity securities 0.680% next $2.5 billion
of companies in the financial 0.650% next $2.5 billion
services industry believed by 0.640% next $2.5 billion
the Fund's investment manager 0.630% next $2.5 billion
to be undervalued. 0.620% thereafter**
</TABLE>
B-10
<PAGE> 47
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Kemper-Dreman High Return High total rate of return. 0.750% to $250 million N/A*
Equity Fund 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
GLOBAL AND INTERNATIONAL FUNDS
Kemper Asian Growth Fund Long-term capital growth by 0.850% to $250 million $ 6,398,000
investing in a diversified 0.820% next $750 million
portfolio of Asian equity 0.800% next $1.5 billion
securities. 0.780% next $2.5 billion
0.750% next $2.5 billion
0.740% next $2.5 billion
0.730% next $2.5 billion
0.720% thereafter**
Kemper Emerging Markets Long-term growth of capital 1.250% of net assets** $ 1,147,000@
Growth Fund primarily through equity
investment in emerging
markets around the globe.
Kemper Emerging Markets High current income and, 1.000% of net assets** $ 5,616,000@
Income Fund secondarily, long-term
capital appreciation.
Kemper Europe Fund Long-term capital growth by 0.750% to $250 million $ 23,910,000
investing in a diversified 0.720% next $750 million
portfolio of European equity 0.700% next $1.5 billion
securities. 0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Global Blue Chip Fund Long-term growth of capital 1.000% to $250 million $ 3,663,000@
through a diversified 0.950% next $750 million
worldwide portfolio of 0.900% thereafter**
marketable securities,
primarily equity securities.
Kemper Global Income Fund High current income 0.750% to $250 million $ 99,054,000
consistent with prudent total 0.720% next $750 million
return asset management by 0.700% next $1.5 billion
investing in a portfolio of 0.680% next $2.5 billion
investment grade foreign and 0.650% next $2.5 billion
domestic fixed income 0.640% next $2.5 billion
securities. 0.630% next $2.5 billion
0.620% thereafter
Kemper International Fund Total return, a combination 0.750% to $250 million $ 588,069,000
of capital growth and income, 0.720% next $750 million
principally through an 0.700% next $1.5 billion
internationally diversified 0.680% next $2.5 billion
portfolio of equity 0.650% next $2.5 billion
securities. 0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper International Growth Long-term growth of capital 1.000% of net assets** $ 1,556,000@
and Income Fund and income, primarily from
foreign equity securities.
</TABLE>
B-11
<PAGE> 48
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Kemper Latin America Fund Long-term capital 1.250% to $250 million $ 1,441,000@
appreciation through 1.200% next $750 million
investment primarily in the 1.150% thereafter**
securities of Latin American
issuers.
ASSET ALLOCATION FUNDS
Kemper Horizon 10+ Portfolio A balance between growth of 0.580% to $250 million $ 106,339,000
capital and income, 0.550% next $750 million
consistent with moderate 0.530% next $1.5 billion
risk. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 20+ Portfolio Growth of capital and, 0.580% to $250 million $ 110,076,000
secondarily, income. 0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 5 Portfolio Income consistent with 0.580% to $250 million $ 55,335,000
preservation of capital and, 0.550% next $750 million
secondarily, growth of 0.530% next $1.5 billion
capital. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
INCOME FUNDS
Kemper Adjustable Rate U.S. High current income 0.550% to $250 million $ 81,967,000
Government Fund consistent with low 0.520% next $750 million
volatility of principal. 0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
Kemper Diversified Income High current return. 0.580% to $250 million $ 861,543,000
Fund 0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper High Yield Fund The highest level of current 0.580% to $250 million $4,939,302,000
income from a professionally 0.550% next $750 million
managed, diversified 0.530% next $1.5 billion
portfolio of fixed income 0.510% next $2.5 billion
securities consistent with 0.480% next $2.5 billion
reasonable risk. 0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
</TABLE>
B-12
<PAGE> 49
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Kemper High Yield Total return through high 0.650% to $250 million $ 16,188,000
Opportunity Fund current income and capital 0.620% next $750 million
appreciation. 0.600% next $1.5 billion
0.580% next $2.5 billion
0.550% next $2.5 billion
0.530% next $2.5 billion
0.510% next $2.5 billion
0.490% thereafter
Kemper Income and Capital As high a level of current 0.550% to $250 million $ 613,470,000
Preservation Fund income as is consistent with 0.520% next $750 million
preservation of capital. 0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
Kemper Short-Intermediate High current income and 0.550% to $250 million $ 171,400,000
Government Fund preservation of capital, with 0.520% next $750 million
equal emphasis, from a 0.500% next $1.5 billion
portfolio primarily 0.480% next $2.5 billion
consisting of short-and 0.450% next $2.5 billion
intermediate-term U.S. 0.430% next $2.5 billion
Government securities. 0.410% next $2.5 billion
0.400% thereafter
Kemper U.S. Government High current income, 0.450% to $250 million $3,642,027,000
Securities Fund liquidity and security of 0.430% next $750 million
principal. 0.410% next $1.5 billion
0.400% next $2.5 billion
0.380% next $2.5 billion
0.360% next $2.5 billion
0.340% next $2.5 billion
0.320% thereafter
Kemper U.S. Mortgage Fund Maximum current return from 0.550% to $250 million $2,497,825,000
U.S. Government securities. 0.520% next $750 million
0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
CLOSED-END FUNDS
The Growth Fund of Spain, Long-term capital 1.000% of net assets $ 315,059,000
Inc. appreciation by investing
primarily in equity
securities of Spanish
companies.
Kemper High Income Trust Highest current income 0.850% of net assets $ 222,919,000
obtainable consistent with
reasonable risk with capital
gains secondary.
Kemper Intermediate High current income 0.800% of net assets(1) $ 267,218,000
Government Trust consistent with preservation
of capital by investing in
U.S. and foreign government
securities.
</TABLE>
B-13
<PAGE> 50
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Kemper Multi-Market Income High current income 0.850% of net assets(2) $ 217,508,000
Trust consistent with prudent total
return asset management by
investing in a diversified
portfolio of investment grade
tax-exempt securities.
Kemper Municipal Income High level of current income 0.550% of net assets(2) $ 686,179,000
Trust exempt from federal income
tax.
Kemper Strategic Income Fund High current income by 0.850% of net assets(2) $ 53,129,000
investing its assets in a
combination of lower-rated
corporate fixed-income
securities, fixed-income
securities of emerging market
and other foreign issuers
and, fixed-income securities
of the U.S. Government and
its agencies and
instrumentalities and private
mortgage-backed issuers.
Kemper Strategic Municipal High level of current income 0.600% of net assets(2) $ 130,895,000
Income Trust exempt from federal income
tax by investing in a
diversified portfolio of
tax-exempt municipal
securities.
ANNUITY PRODUCTS
Kemper Blue Chip Portfolio Growth of capital and income. 0.650% of net assets $ 18,421,000
Kemper Contrarian Value High rate of return. 0.750% of net assets $ 162,380,000
Portfolio
Kemper Global Blue Chip Long-term growth of capital 1.000% to $250 million N/A*
Portfolio through diversified worldwide 0.950% next $750 million
portfolio of marketable 0.900% thereafter
securities, primarily equity
securities.
Kemper Global Income High current income 0.750% of net assets $ 2,145,000
Portfolio consistent with prudent total
return asset management.
Kemper Government Securities High current income 0.550% of net assets $ 86,682,000
Portfolio consistent with preservation
of capital from a portfolio
consisting primarily of U.S.
Government securities.
Kemper Growth Portfolio Maximum appreciation of 0.600% of net assets $ 563,016,000
capital.
Kemper High Yield Portfolio High level of current income 0.600% of net assets $ 391,664,000
by investing in fixed income
securities.
Kemper Horizon 10+ Portfolio A balance between growth of 0.600% of net assets $ 22,553,000
capital and income consistent
with moderate risk.
Kemper Horizon 20+ Portfolio Growth of capital and, 0.600% of net assets $ 16,659,000
secondarily, income.
</TABLE>
B-14
<PAGE> 51
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Kemper Horizon 5 Portfolio Income consistent with 0.600% of net assets $ 14,258,000
preservation of capital, and
secondarily, growth.
Kemper International Growth Long-term growth of capital 1.000% of net assets N/A*
and Income Portfolio and current income, primarily
from foreign equity
securities.
Kemper International Total return, a combination 0.750% of net assets $ 200,046,000
Portfolio of capital growth and income,
principally through an
internationally diversified
portfolio of equity
securities.
Kemper Investment Grade Bond High current income by 0.600% of net assets $ 15,504,000
Portfolio investing primarily in a
diversified portfolio of
investment grade debt
securities.
Kemper Money Market Maximum current income to the 0.500% of net assets $ 100,143,000
Portfolio extent consistent with
stability of principal from a
portfolio of high quality
money market instruments.
Kemper Small Cap Growth Maximum capital appreciation 0.650% of net assets $ 137,415,000
Portfolio from a portfolio primarily
consisting of growth stocks
of small companies.
Kemper Small Cap Value Long-term capital 0.750% of net assets $ 76,108,000
Portfolio appreciation from a portfolio
primarily of value stocks of
smaller companies.
Kemper Total Return High total return through a 0.550% of net assets $ 786,996,000
Portfolio combination of income and
capital appreciation.
Kemper Value+Growth Growth of capital through 0.750% of net assets $ 69,094,000
Portfolio professional management of a
portfolio of growth and value
stocks.
Kemper-Dreman Financial Long-term capital 0.750% to $250 million N/A*
Services Portfolio appreciation by investing 0.720% next $750 million
primarily in common stocks 0.700% next $1.5 billion
and other equity securities 0.680% next $2.5 billion
of companies in the financial 0.650% next $2.5 billion
services industry believed by 0.640% next $2.5 billion
the investment manger to be 0.630% next $2.5 billion
undervalued. 0.620% thereafter
</TABLE>
B-15
<PAGE> 52
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Kemper-Dreman High Return High rate of total return. 0.750% to $250 million N/A*
Equity Portfolio 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
MONEY MARKET FUNDS
Government Securities Maximum current income to the 0.220% to $500 million $ 810,001,000
Portfolio (Cash Account extent consistent with 0.200% next $500 million
Trust) stability of capital from a 0.175% next $1 billion
portfolio of U.S. Government 0.160% next $1 billion
obligations. 0.150% thereafter(1)**
Government Securities Maximum current income to the 0.220% to $500 million $ 391,861,000
Portfolio (Cash Equivalent extent consistent with 0.200% next $500 million
Fund) stability of capital from a 0.175% next $1 billion
portfolio of U.S. Government 0.160% next $1 billion
obligations. 0.150% thereafter(1)
Government Securities Maximum current income to the 0.150% of net $ 312,194,000
Portfolio (Investors Cash extent consistent with assets(1)**
Trust) stability of capital by
investing in U.S. Government
obligations and repurchase
agreements.
Investors Florida Municipal Maximum current income exempt 0.220% to $500 million $ 7,611,000
Cash Fund from federal income taxes to 0.200% next $500 million
the extent consistent with 0.175% next $1 billion
stability of capital. 0.160% next $1 billion
0.150% thereafter(1)**
Investors Michigan Municipal Maximum current income exempt 0.22% to $500 million N/A*
Cash Fund from federal and Michigan 0.20% next $500 million
income taxes to the extent 0.175% next $1 billion
consistent with stability of 0.16% next $1 billion
capital 0.15% thereafter
Investors New Jersey Maximum current income exempt 0.220% to $500 million $ 4,665,000
Municipal Cash Fund from federal and New Jersey 0.200% next $500 million
income taxes to the extent 0.175% next $1 billion
consistent with stability of 0.160% next $1 billion
capital. 0.150% thereafter(3)**
Investors Pennsylvania Maximum current income exempt 0.220% to $500 million $ 3,195,000
Municipal Cash Fund from federal and Pennsylvania 0.200% next $500 million
income taxes to the extent 0.175% next $1 billion
consistent with stability of 0.160% next $1 billion
capital. 0.150% thereafter(3)**
</TABLE>
B-16
<PAGE> 53
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Kemper Cash Reserves Fund Maximum current income to the 0.400% to $250 million $ 339,655,000
extent consistent with 0.380% next $750 million
stability of principal from a 0.350% next $1.5 billion
portfolio of high quality 0.320% next $2.5 billion
money market instruments. 0.300% next $2.5 billion
0.280% next $2.5 billion
0.260% next $2.5 billion
0.250% thereafter
Money Market Portfolio (Cash Maximum current income to the 0.220% to $500 million $2,004,420,000
Account Trust) extent consistent with 0.200% next $500 million
stability of capital from a 0.175% next $1 billion
portfolio primarily of 0.160% next $1 billion
commercial paper and bank 0.150% thereafter(1)**
obligations.
Money Market Portfolio (Cash Maximum current income to the 0.220% to $500 million $ 851,592,000
Equivalent Fund) extent consistent with 0.200% next $500 million
stability of capital from a 0.175% next $1 billion
portfolio primarily of 0.160% next $1 billion
commercial paper and bank 0.150% thereafter(4)
obligations.
Tax-Exempt Portfolio (Cash Maximum current income exempt 0.220% to $500 million $ 370,036,000
Account Trust) from federal income taxes to 0.200% next $500 million
the extent consistent with 0.175% next $1 billion
stability of capital from a 0.160% next $1 billion
portfolio of municipal 0.150% thereafter(1)**
securities.
Tax-Exempt Portfolio (Cash Maximum current income that 0.220% to $500 million $ 333,427,000
Equivalent Fund) is exempt from federal income 0.200% next $500 million
taxes to the extent 0.175% next $1 billion
consistent with stability of 0.160% next $1 billion
capital from a portfolio of 0.150% thereafter
municipal securities.
Treasury Portfolio Maximum current income to the 0.150% of net $ 74,290,000
(Investors Cash Trust) extent consistent with assets(5)**
stability of capital by
investing in U.S. Government
obligations and repurchase
agreements.
Zurich Government Money Fund Maximum current income to the 0.500% to $215 million $ 686,871,000
extent consistent with 0.375% next $335 million
stability of principal from a 0.300% next $250 million
portfolio of U.S. Government 0.250% thereafter(6)
obligations.
Zurich Money Market Fund Maximum current income to the 0.500% to $215 million $4,538,627,000
extent consistent with 0.375% next $335 million
stability of principal from a 0.300% next $250 million
portfolio primarily 0.250% thereafter(6)
consisting of commercial
paper and bank obligations.
</TABLE>
B-17
<PAGE> 54
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE ASSETS
---------- --------- -------- ------
<S> <C> <C> <C>
Zurich Tax-Free Money Fund Maximum current income to the 0.500% to $215 million $ 815,894,000
extent consistent with 0.375% next $335 million
stability of principal from a 0.300% next $250 million
portfolio of municipal 0.250% thereafter(6)
securities.
Zurich YieldWise Money Fund Maximum current income to the 0.500% to $215 million $1,071,728,000
extent consistent with 0.375% next $335 million
stability of principal by 0.300% next $250 million
investing in high-quality 0.250% thereafter**
short-term money market
instruments
Tax-Exempt New York Money Maximum current income exempt 0.220% to $500 million $ 104,198,000
Market Fund from federal, New York State 0.200% next $500 million
and New York City income 0.175% next $1 billion
taxes to the extent 0.160% next $1 billion
consistent with stability of 0.150% thereafter(3)**
capital.
Tax-Exempt California Money Maximum current income exempt 0.220% to $500 million $ 117,432,000
Market Fund from federal and California 0.200% next $500 million
income taxes to the extent 0.175% next $1 billion
consistent with stability of 0.160% next $1 billion
capital. 0.150% thereafter
</TABLE>
- ------------------------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
* Fee information is not available for Kemper-Dreman Financial Services Fund,
which commenced operations on March 9, 1998; Investors Michigan Municipal
Cash Fund, which commenced operations on April 6, 1998; Kemper-Dreman High
Return Equity Portfolio, which commenced operations on May 1, 1998;
Kemper-Dreman Financial Services Portfolio, which commenced operations on
May 4, 1998; Kemper Global Blue Chip Portfolio and Kemper International
Growth and Income Portfolio, each of which commenced operations on May 5,
1998; or Kemper Small Cap Relative Value Fund, which commenced operations on
May 6, 1998.
** Subject to waivers and/or reimbursements.
*** Net asset information is provided for the semi-annual period ended April
30, 1998.
@ Net asset information is provided for the semi-annual period ended March 31,
1998.
(1) Payable in the aggregate for each of the Government Securities Portfolio,
Money Market Portfolio and Tax-Exempt Portfolio series of Cash Account
Trust.
(2) Based on average weekly net assets.
(3) Payable in the aggregate for each of the Investors Florida Municipal Cash
Fund, Investors New Jersey Municipal Cash Fund, Investors Pennsylvania
Municipal Cash Fund and Tax-Exempt New York Money Market Fund series of
Investors Municipal Cash Fund.
(4) Payable in the aggregate for each of the Government Securities Portfolio
and Money Market Portfolio series of Cash Equivalent Fund.
(5) Payable in the aggregate for each of the Government Securities Portfolio
and Treasury Portfolio series of Investors Cash Trust.
(6) Payable in the aggregate for each of the Zurich Government Money Fund,
Zurich Money Market Fund and Zurich Tax-Free Money Fund series of Zurich
Money Funds.
B-18
<PAGE> 55
For more information, please call Shareholder Communications Corporation,
your Fund's information agent, at 1-800-733-8481, ext. 429.
<PAGE> 56
APPENDIX 1
SCUDDER TRUST AND SERIES
SCUDDER VARIABLE LIFE INVESTMENT FUND
Balanced Portfolio
Bond Portfolio
Capital Growth Portfolio
Global Discovery Portfolio
Growth and Income Portfolio
International Portfolio
Money Market Portfolio
<PAGE> 57
APPENDIX 2
FUND SHARES OUTSTANDING
Holders of record of the shares of each Fund at the close of business on
October 19, 1998 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. The table below sets forth the number of shares outstanding for
each Fund as of June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING
FUND AS OF JUNE 30, 1998
- ---- -------------------
<S> <C>
Balanced Portfolio 9,995,418.612
Bond Portfolio 13,105,571.062
Capital Growth Portfolio -- Class A 37,473,403.311
Capital Growth Portfolio -- Class B 29,007.957
Global Discovery Portfolio -- Class A 2,913,243.070
Global Discovery Portfolio -- Class B 484,801.812
Growth and Income Portfolio -- Class A 15,726,716.507
Growth and Income Portfolio -- Class B 1,147,226.241
International Portfolio -- Class A 34,869,081.952
International Portfolio -- Class B 28,480.256
Money Market Portfolio 124,855,007.993
</TABLE>
<PAGE> 58
APPENDIX 3
BENEFICIAL OWNERS OF 5% OR MORE OF FUND SHARES
As of June 30, 1998 the nominees to and the Trustees of the Board of
Trustees owned directly or beneficially none of the outstanding shares of any
Fund. The information as to beneficial ownership is based on statements
furnished to the Trust by each Trustee and nominee.
As of June 30 1998, 5.72% of the outstanding shares of BALANCED PORTFOLIO
and 7.47% of GLOBAL DISCOVERY PORTFOLIO were held in the name of Banner Life
Insurance Co., 1707 Research Boulevard, Rockville, MD 20850, who may be deemed
to the beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
As of June 30, 1998, 7.25% of the outstanding shares of BALANCED PORTFOLIO
were held in the name of Charter National Life Insurance Co., 8301 Maryland
Avenue, St. Louis, MO 63105, who may be deemed to be beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
As of June 30, 1998, 50.23% of the outstanding share of MONEY MARKET
PORTFOLIO, 29.98% of BOND PORTFOLIO, 21.36% of CAPITAL GROWTH PORTFOLIO, 54.98%
of BALANCED PORTFOLIO, 20.88% International Portfolio, 70.48% GROWTH & INCOME
PORTFOLIO, 75.64% Global Discovery were held in the name of Charter National
Life Insurance Co., 8301 Maryland Avenue, St. Louis, MO 63105, who may be deemed
to be beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
As of June 30, 1998, 6.12% of the outstanding shares of BOND PORTFOLIO,
10.42% of BALANCED PORTFOLIO were held in the name of Lincoln Benefit Life
Insurance Co., 206 South 13th Street, Lincoln, NE 68508, Who may be deemed to be
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
As of June 30, 1998, 40.92% of the outstanding shares of BOND PORTFOLIO,
60.07% of CAPITAL GROWTH PORTFOLIO and 38.88% of INTERNATIONAL PORTFOLIO were
held in the name of Mutual of America Insurance Co., 320 Park Avenue, New York,
NY 10022, who may be deemed to be beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 7.34% of the outstanding shares of INTERNATIONAL
PORTFOLIO, 6.82% of GROWTH & INCOME PORTFOLIO, 14.05% of GLOBAL DISCOVERY
PORTFOLIO were held in the name of United of Omaha Life Insurance Co., Mutual Of
Omaha Plaza, 3301 Dodge Street, Omaha, NE 68131, who may be deemed to be
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
As of June 30, 1998, 10.79% of the outstanding shares of BOND PORTFOLIO and
12.85% of GROWTH & INCOME PORTFOLIO were held in the name of Provident Mutual
Life and Annuity Co. of America, 1205 Westlake Drive, Berwyn, PA
<PAGE> 59
19312, who may be deemed to be beneficial owner of certain of these shares, but
disclaims any beneficial ownership therein.
As of June 30, 1998, 28.40% of the outstanding share of BALANCED PORTFOLIO,
7.23% of INTERNATIONAL PORTFOLIO were held in the name of Safeco Life Insurance
Co., 15411 N.E. 51st Street, Redmond, WA 98052, who may be deemed to be
beneficial owner of certain of these shares, but disclaims any beneficial
ownership therein.
As of June 30, 1998, 39.85% of outstanding share of MONEY MARKET PORTFOLIO,
6.81% of CAPITAL GROWTH PORTFOLIO and 16.38% of INTERNATIONAL PORTFOLIO were
held in the name of The Union Central Life Insurance Co., 1876 Waycross Road,
Cincinnati, OH 45240, who may be deemed to be beneficial owner of certain of
these shares, but disclaims any beneficial ownership therein.
As of June 30, 1998, 6.36% of the outstanding shares of MONEY MARKET
PORTFOLIO were held in the name of United Companies Life Insurance Co., P.O. Box
179, Cincinnati, OH 45201, who may be deemed to be beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
As of June 30, 1998, 6.11% of the outstanding shares of BOND PORTFOLIO were
held in the name of Washington National Life Insurance Co., One President
Parkway, Kokomo, IN 46904, who may be deemed to be beneficial owner of certain
of these shares, but disclaims any beneficial ownership therein.
To the best of the Trust's knowledge, as of June 30, 1998, no person owned
beneficially more than 5% of any Fund's outstanding shares, except as stated
above.
<PAGE> 60
APPENDIX 4
FUND SHARES OWNED BY TRUSTEES
[TO BE PROVIDED]
<PAGE> 61
APPENDIX 5
FUND MANAGEMENT FEE RATES, NET ASSETS AND
AGGREGATE MANAGEMENT FEES
<TABLE>
<CAPTION>
AGGREGATE
MANAGEMENT MANAGEMENT
FUND FISCAL YEAR NET ASSETS FEE RATE+ FEE PAID
---- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balanced 12/31/97 $118,373,215 0.475% $ 488,616
Portfolio
Bond Portfolio 12/31/97 $ 81,387,032 0.475% $ 321,323
Capital Growth 12/31/97 $676,317,582 0.475% on first $500 million of $2,691,980
Portfolio avg. daily net assets; 0.45% on
assets over $500 million.
Global Discovery 12/31/97 $ 20,115,141 0.975% $ 179,723
Portfolio
Growth and 12/31/97 $163,603,606 0.475% $ 592,383
Income
Portfolio
International 12/31/97 $427,237,880 0.875% on first $500 million of $6,520,030
Portfolio avg. daily net assets; 0.725% on
assets over $500 million.
Money Market 12/31/97 $102,576,377 0.37% $ 384,554
Portfolio
</TABLE>
- ------------------------------
+ The management fee rates shown are for each Fund's most recently completed
fiscal.
<PAGE> 62
APPENDIX 6
DATES RELATING TO
FORMER AND NEW INVESTMENT MANAGEMENT AGREEMENTS
<TABLE>
<CAPTION>
TERMINATION
FORMER DATE
INVESTMENT NEW (UNLESS
DATE OF MANAGEMENT INVESTMENT CONTINUED)
FORMER AGREEMENT MANAGEMENT FOR NEW
COMMENCEMENT INVESTMENT LAST AGREEMENT INVESTMENT
OF MANAGEMENT APPROVED BY LAST APPROVED MANAGEMENT
FUND OPERATIONS AGREEMENT SHAREHOLDERS BY TRUSTEES AGREEMENT
---- ------------ ---------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Balanced Portfolio 7/16/85 12/31/97 10/24/97 8/12/98 9/30/99
Bond Portfolio 7/16/85 12/31/97 10/24/97 8/12/98 9/30/99
Capital Growth Portfolio 7/16/85 12/31/97 10/24/97 8/12/98 9/30/99
Global Discovery Portfolio 5/1/96 12/31/97 10/24/97 8/12/98 9/30/99
Growth and Income Portfolio 5/1/94 12/31/97 10/24/97 8/12/98 9/30/99
International Portfolio 5/1/87 12/31/97 10/24/97 8/12/98 9/30/99
Money Market Portfolio 7/16/85 12/31/97 10/24/97 8/12/98 9/30/99
</TABLE>
<PAGE> 63
APPENDIX 7
FEES PAID TO SFAC
<TABLE>
<CAPTION>
AGGREGATE FEE
FUND FISCAL YEAR PAID TO SFAC
- ---- ----------- -------------
<S> <C> <C>
Balanced Portfolio 12/31/97 $ 39,456
Bond Portfolio 12/31/97 $ 38,269
Capital Growth Portfolio 12/31/97 $ 96,203
Global Discovery Portfolio 12/31/97 $ 61,000
Growth and Income Portfolio 12/31/97 $ 62,698
International Portfolio 12/31/97 $473,940
Money Market Portfolio 12/31/97 $ 30,000
</TABLE>
<PAGE> 64
SCUDDER VARIABLE LIFE INVESTMENT FUND
PROXY [ PORTFOLIO] PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS -- DECEMBER 16, 1998
The undersigned hereby appoints Bruce H. Goldfarb, Kathryn L. Quirk, Thomas
F. McDonough and Daniel Pierce and each of them, the proxies of the undersigned,
with the power of substitution to each of them, to vote all shares of the Fund
which the undersigned is entitled to vote at the Special Meeting of Shareholders
of the Fund to be held at the offices of Scudder Kemper Investments, Inc., Two
International Place, Boston, Massachusetts 02110, on Thursday, December 16, 1998
at [ ] a.m., eastern time, and at any adjournments thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR THE ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder Kemper Investments, Inc., recommend that you vote FOR the
item.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
<PAGE> 65
2. To approve the revision of the Fund's fundamental lending policy.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
The proxies are authorized to vote in their discretion on any other
business which may properly come before the meeting and any adjournments
thereof.
Please sign exactly as your name or
names appear. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title as such.
-----------------------------------
(Signature of Shareholder)
-----------------------------------
(Signature of joint owner, if any)
Dated
--------------------------------------------------------- ,
1998
PLEASE SIGN AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
NO POSTAGE IS REQUIRED.
