<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[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 Rule 14a-11(c) or Rule 14a-12
INVESTORS FUND SERIES
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(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):
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
September 1997
Kemper
Important News
for Investor Fund Series Shareholders
WHILE WE ENCOURAGE YOU TO READ THE FULL TEXT OF THE ENCLOSED PROXY STATEMENT,
HERE IS A BRIEF OVERVIEW OF MAJOR MATTERS TO BE VOTED UPON.
================================================================================
Q&A
QUESTIONS AND ANSWERS
Q WHAT IS HAPPENING?
A Zurich Insurance Company, the parent of your Fund's investment manager (Zurich
Kemper Investments, Inc. or "ZKI" or, for Kemper Value Portfolio and Kemper
Small Cap Value Portfolio, Zurich Kemper Value Advisers, Inc. or "ZKVA") has
entered into an agreement with Scudder, Stevens & Clark, Inc. ("Scudder")
whereby Zurich will acquire approximately 70% of Scudder. Upon completion of the
transaction, Scudder will change its name to Scudder Kemper Investments, Inc.
("SKI") and ZKI and ZKVA will be combined with SKI. Because of the transaction,
it is necessary for your Fund to approve a new investment management agreement.
The following pages elaborate on Scudder, the proposed new investment management
agreement and the Fund Board's evaluation of Zurich and Scudder. A vote is also
being sought on the election of Board members and the selection of independent
auditors.
Q WHAT IS SCUDDER?
A Scudder is one of America's oldest and largest investment management firms. It
manages assets invested in equities, fixed income and money market instruments
in both developed and emerging markets. Scudder provides investment services for
open-end and closed-end funds, and private and institutional clients.
Q WHY AM I BEING ASKED TO VOTE ON THE PROPOSED NEW INVESTMENT MANAGEMENT
AGREEMENT?
A The Investment Company Act of 1940 requires a vote whenever there is a change
in control of an investment manager. The Zurich/Scudder transaction is such a
change of control and requires a fund shareholder vote upon a new investment
management agreement.
Q HOW WILL THE ZURICH/SCUDDER TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?
A Your Fund and your Fund investment will not change. You will still own the
same shares in the same Fund. If the new investment management agreement is
approved, your
KEMPER LOGO
<PAGE> 3
Fund shares will not change and the advisory fees charged to your
Fund will not change.
Zurich and Scudder have com-
mitted to provide all resources
necessary to provide your Fund
with top quality investment
management and shareholder
services.
Q WILL THE INVESTMENT ADVISORY FEES BE THE SAME?
A Yes, the investment advisory fees paid by your Fund will remain the same.
Q HOW DO THE BOARD MEMBERS OF MY FUND SUGGEST THAT I VOTE?
A After careful consideration, the board members of your Fund, including all of
the independent members, recommend that you vote "For" all the items on the
enclosed proxy card.
Q WHO IS PAYING THE COST OF THE SHAREHOLDER MEETING AND THIS PROXY SOLICITATION?
A ZKI -- not your Fund --is paying all costs of the Funds' shareholder meeting
and proxy solicitation.
Q WHOM DO I CALL FOR MORE INFORMATION?
A Please call Shareholder Services at l-800-537-1988.
ABOUT THE PROXY CARD
Because each Fund must vote separately, you are being sent a
proxy card for each Fund account that you have.
Please vote all issues shown on each proxy card that you receive.
Please vote on each issue using blue or black ink to mark an X in one of the
three boxes provided on each proxy card. On Item 1 (election of trustees),
mark--For All, Withhold All or For All Except. If you mark an X in the For All
Except box, you should print the number(s) relating to the individual(s) for
whom you wish to withhold authority. On all other Items, mark--For, Against or
Abstain. Then sign, date and return each of your proxy cards in the
accompanying postage-paid envelope. All registered owners of an account, as
shown in the address on the proxy card, must sign the proxy card. If you are
signing for a corporation, trust or estate, please indicate your title or
position.
We appreciate your continuing support and look forward to serving your future
investment needs.
THANK YOU FOR MAILING YOUR
PROXY CARD PROMPTLY!
PROXY CARD SAMPLE
<PAGE> 4
KEMPER FUNDS
================================================================================
INVESTORS FUND SERIES
Kemper Money Market Portfolio
Kemper Total Return Portfolio
Kemper High Yield Portfolio
Kemper Growth Portfolio
Kemper Government Securities Portfolio
Kemper International Portfolio
Kemper Small Cap Growth Portfolio
Kemper Investment Grade Bond Portfolio
Kemper Value Portfolio
Kemper Small Cap Value Portfolio
Kemper Value and Growth Portfolio
Kemper Horizon 20+ Portfolio
Kemper Horizon 10+ Portfolio
Kemper Horizon 5 Portfolio
Kemper Blue Chip Portfolio
Kemper Global Income Portfolio
(LOGO)Printed on recycled paper
<PAGE> 5
INVESTORS FUND SERIES
222 South Riverside Plaza Chicago, Illinois 60606
Telephone (800) 621-1048
, 1997
Dear Investors Fund Series Shareholder:
As you read in the Questions and Answers (Q & A) on the outside cover, Zurich
Insurance Company ("Zurich") has entered into an agreement with Scudder, Stevens
& Clark, Inc. ("Scudder") pursuant to which Zurich will acquire approximately
70% of Scudder. Upon completion of the transaction, Scudder will change its name
to Scudder Kemper Investments, Inc. ("SKI"), and your Fund's investment manager
(Zurich Kemper Investments, Inc. or "ZKI" or, for the Kemper Value Portfolio and
Kemper Small Cap Value Portfolio, Zurich Kemper Value Advisors, Inc. or "ZKVA")
will be combined with SKI. Because of the transaction, it is necessary for your
Fund to approve new investment management agreement.
If the new investment management agreement is approved, YOUR FUND SHARES WILL
NOT CHANGE, AND THE ADVISORY FEES CHARGED TO YOUR FUND WILL NOT CHANGE. FURTHER,
YOU SHOULD CONTINUE TO RECEIVE THE HIGH QUALITY INVESTMENT MANAGEMENT AND
SHAREHOLDER SERVICES THAT YOU HAVE COME TO EXPECT OVER THE YEARS.
Your Fund Board has unanimously approved the proposals and recommends them for
your approval. I encourage you to vote in favor of the proposals.
As always, we thank you for your confidence and support.
Sincerely,
[LOGO]
Stephen B. Timbers
President [KEMPER LOGO]
<PAGE> 6
INVESTORS FUND SERIES
222 South Riverside Plaza Chicago, Illinois 60606
Telephone (800) 621-1048
NOTICE OF JOINT MEETING OF SHAREHOLDERS
DECEMBER 3, 1997 AND PROXY AND VOTING INSTRUCTION STATEMENT
, 1997
To the Shareholders:
You are invited to attend a special meeting of shareholders of Investors Fund
Series (the "Fund"). The meeting will be held in the Presentation Room on the
32nd Floor at the offices of the Funds, 222 South Riverside Plaza, Chicago,
Illinois on Wednesday, December 3, 1997 at 2:30 p.m., Chicago time, for the
following purposes and to transact such other business as may properly come
before the meeting or any adjournment of the meeting:
1. To elect eight (8) Trustees to the Board of Trustees.
2. To ratify or reject the selection of Ernst & Young LLP as independent
auditors for the current fiscal year.
3. To approve or disapprove a new investment management agreement with Scudder
Kemper Investments, Inc. ("SKI") (or, in the case of any series of the Fund
except Kemper Value Portfolio and Kemper Small Cap Value Portfolio, with
Zurich Kemper Investments, Inc. ("ZKI") transferable to SKI or, in the case
of Kemper Value Portfolio and Kemper Small Cap Value Portfolio, with Zurich
Kemper Value Advisors, Inc. ("ZKVA") transferable to SKI).
4. To approve or disapprove a new sub-advisory agreement with Zurich Investment
Management Limited ("ZIML") (including approval of a subsequent assignment)
[for Kemper International Portfolio and Kemper Global Income Portfolio only].
5. To approve or disapprove a new sub-advisory agreement with Zurich Kemper
Value Advisors, Inc. ("ZKVA") [for Kemper Value Plus Growth Portfolio, Kemper
Horizon 20+ Portfolio, Kemper Horizon 10+ Portfolio and Kemper Horizon 5
Portfolio only].
6. To approve or disapprove an amendment to the Fund's Agreement and Declaration
of Trust.
<PAGE> 7
The Board of Trustees of the Fund has selected the close of business on
September 22, 1997 as the record date for the determination of shareholders of
the Fund entitled to notice of and to vote at the meeting. Shareholders are
entitled to one vote for each share held.
- ------------------------------------------------------------------------------
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE ENCLOSED CARD. SIGN, DATE AND
RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR PROXY PROMPTLY.
- ------------------------------------------------------------------------------
<PAGE> 8
The accompanying proxy and voting instructions are solicited by the Board of
Trustees (the "Board") of the Fund for voting at the special meeting of
shareholders of the Fund to be held on Wednesday, December 3, 1997, and at any
and all adjournments thereof (the "Meeting"). The Fund is a "series company"
that issues various series of shares. (Each series also is sometimes described
herein as a "Fund.") Each series has its own investment objective and policies
and operates independently for purposes of investments, dividends and
redemptions. The series of the Fund are Kemper Money Market Portfolio ("KMMP"),
Kemper Total Return Portfolio ("KTRP"), Kemper High Yield Portfolio ("KHYP"),
Kemper Growth Portfolio ("KGP"), Kemper Government Securities Portfolio
("KGSP"), Kemper International Portfolio ("KIP") Kemper Small Cap Growth
Portfolio ("KSCGP"), Kemper Investment Grade Bond Portfolio ("KIGBP"), Kemper
Value Portfolio ("KVP"), Kemper Small Cap Value Portfolio ("KSCVP"), Kemper
Value Plus Growth Portfolio ("KVGP"), Kemper Horizon 20+ Portfolio ("KH20P"),
Kemper Horizon 10+ Portfolio ("KH10P"), Kemper Horizon 5 Portfolio ("KH5P"),
Kemper Blue Chip Portfolio ("KBCP"), Kemper Global Income Portfolio ("KGIP"),
Zurich High Yield Portfolio ("ZHYP"), and Zurich Emerging Markets Portfolio
("ZEMP"). As of September 22, 1997, ZHYP and ZEMP had not commenced operations
and are not currently available for investment.
The Fund is the funding vehicle for variable life insurance contracts ("VLI
contracts") and variable annuity contracts ("VA contracts") offered by the
separate accounts of certain life insurance companies ("Participating Insurance
Companies"). Individual VLI contract holders and VA contract holders are not the
"shareholders" of the Fund. Rather, the Participating Insurance Companies and
their separate accounts are the shareholders. To the extent required to be
consistent with interpretations of voting requirements by the staff of the
Securities and Exchange Commission, each Participating Insurance Company will
offer to contract owners the opportunity to instruct it as to how it should vote
shares held by it and the Separate Accounts on the items to be considered at the
meeting. The proxy and voting instruction statement is furnished to contract
owners entitled to give voting instructions with regard to each series of the
Fund. This proxy and voting instruction statement was first mailed to
shareholders and contract owners on or about , 1997.
On Item 1 (election of trustees) and Item 2 (ratification of selection of
auditors), the Fund will vote in the aggregate and not by series. On Item 3
(approval of new investment management agreement), each series of the Fund will
vote separately. On Item 4 (approval of new sub-advisory agreement with ZIML)
and Item 5 (approval of new sub-advisory agreement with ZKVA), each affected
series of the Fund will vote separately. On Item 6 (approval of a change in the
Fund's Declaration of
2
<PAGE> 9
Trust), each series of the Fund will vote separately. The Board recommends an
affirmative vote on all items. The vote required to approve each item is
described under the section of this proxy and voting instruction statement
entitled "Miscellaneous."
3
<PAGE> 10
The following table indicates which shareholders are solicited with respect to
each Item:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
ITEM KMMP KTRP KHYP KGP KGSP KIP KSCGP KIGBP KVP KSCVP KVGP
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
1. Elect Trustees X X X X X X X X X X X
- -------------------------------------------------------------------------------------------------------------------------------
2. Ratify selection of auditors X X X X X X X X X X X
- -------------------------------------------------------------------------------------------------------------------------------
3. Approval of New Investment Management Agreement X X X X X X X X X X X
with Scudder Kemper Investments, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
4. Approval of New Sub-Advisory Agreement with X
Zurich Investment Management Limited
- -------------------------------------------------------------------------------------------------------------------------------
5. Approval of New Sub-Advisory Agreement with X
Zurich Kemper Value Advisors, Inc.
- -------------------------------------------------------------------------------------------------------------------------------
6. Approval of amendment to the Fund's Declaration X X X X X X X X X X X
of Trust
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------------------------------- --------------------------------------
ITEM KH20P KH10P KH5P KBCP KGIP
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------
1. Elect Trustees X X X X X
- ---------------------------------------------------
2. Ratify selection of auditors X X X X X
- ---------------------------------------------------
3. Approval of New Investment Management Agreement X X X X X
with Scudder Kemper Investments, Inc.
- ---------------------------------------------------
4. Approval of New Sub-Advisory Agreement with X
Zurich Investment Management Limited
- ---------------------------------------------------
5. Approval of New Sub-Advisory Agreement with X X X
Zurich Kemper Value Advisors, Inc.
- ---------------------------------------------------
6. Approval of amendment to the Fund's Declaration X X X X X
of Trust
- ---------------------------------------------------
</TABLE>
4
<PAGE> 11
The Board has fixed the close of business on September 22, 1997 as the record
date for the determination of shareholders of the Fund entitled to notice of and
to vote at the Meeting. As of September 22, 1997, shares of the Fund were issued
and outstanding as follows:
<TABLE>
<CAPTION>
SERIES SHARES
------ ------
<S> <C>
KMMP.................................
KTRP.................................
KHYP.................................
KGP..................................
KGSP.................................
KIP..................................
KSCGP................................
KIGBP................................
KVP..................................
KSCVP................................
KVGP.................................
KH20P................................
KH10P................................
KH5P.................................
KBCP.................................
KGIP.................................
</TABLE>
INTRODUCTION
On June 26, 1997, Zurich Insurance Company ("Zurich"), ZKI Holding Corp.
("ZKIH"), Zurich Kemper Investments, Inc. ("ZKI"), Scudder, Stevens & Clark,
Inc. ("Scudder") and the representatives of the beneficial owners of the capital
stock of Scudder ("Scudder Representatives") entered into a transaction
agreement ("Transaction Agreement") pursuant to which Zurich will become the
majority stockholder in Scudder with an approximately 70% interest, and ZKI will
become a wholly-owned subsidiary of, or be combined with, Scudder
("Transaction"). Upon completion of the Transaction, Scudder will change its
name to Scudder Kemper Investments, Inc. ("SKI"). Scudder, a New York-based
investment adviser and the investment manager for the Scudder and AARP Funds,
has approximately $125 billion under management. ZKI, a Chicago-based investment
adviser and the investment manager for the Kemper Funds, and its affiliates have
approximately $85 billion under management. The headquarters of SKI will be in
New York. Edmond D. Villani, Scudder's Chief Executive Officer, will continue as
Chief Executive Officer of SKI and will become a member of Zurich's Corporate
Executive Board. Some of the terms of the Transaction are also set forth in a
form of second amended and restated Security Holders Agreement ("New SHA") to be
entered into among the beneficial owners of the capital stock of Scudder, the
Scudder Representatives, Scudder, Zurich,
5
<PAGE> 12
ZKIH and the Scudder Kemper Investments, Inc. Executive Defined Contribution
Plan Trust.
Consummation of the Transaction would constitute an "assignment," as that term
is defined in the Investment Company Act of 1940 ("1940 Act"), of the Fund's
current investment management agreement with ZKI (or, in the case of KVP and
KSCVP, with Zurich Kemper Value Advisors, Inc. ("ZKVA")). As required by the
1940 Act, each current investment management agreement provides for its
automatic termination in the event of its assignment. Accordingly, as discussed
further below, a new investment management agreement between the Fund and SKI is
being proposed for approval by shareholders of the Fund.
DESCRIPTION OF THE TRANSACTION.
Under the Transaction Agreement, Zurich will pay $866.7 million in cash to
acquire two-thirds of Scudder's outstanding shares and will contribute ZKI to
Scudder for additional shares, following which Zurich will have a 79.1% fully
diluted equity interest in the combined business. Zurich will then transfer a
9.6% fully diluted equity interest in SKI to a defined contribution plan for the
benefit of Scudder and ZKI employees, as well as cash and warrants on Zurich
shares for award to Scudder employees, in each case subject to five-year vesting
schedules. After giving effect to the Transaction, current Scudder stockholders
will have a 29.6% fully diluted equity interest in SKI and Zurich will have a
69.5% fully diluted interest in SKI. Scudder's name will be changed to Scudder
Kemper Investments, Inc.
The purchase price for Scudder or for ZKI in the Transaction is subject to
adjustment based on the effect on revenues of non-consenting clients, and will
be reduced if the annualized investment management fee revenues (excluding the
effect of market changes, but taking into account new assets under management)
from clients at the time of closing, as a percentage of such revenues as of June
30, 1997 (the "Revenue Run Rate Percentage"), is less than 90%.
At the closing, Zurich and the other stockholders of SKI will enter into the New
SHA. Under the New SHA, Scudder stockholders will be entitled to designate three
of the seven members of the SKI board and two of the four members of an
Executive Committee, which will be the primary management-level committee of
SKI. Zurich will be entitled to designate the other four members of the SKI
board and the other two members of the Executive Committee.
The names, addresses and principal occupations of the initial Scudder-designated
directors of SKI are as follows: LYNN S. BIRDSONG, 345 Park Avenue, New York,
New York, Managing Director of Scudder; CORNELIA M. SMALL, 345 Park Avenue, New
York, New York, Managing Director of Scudder; and EDMOND D. VILLANI, 345 Park
Avenue, New
6
<PAGE> 13
York, New York, President, Chief Executive Officer and Managing Director of
Scudder.
The names, addresses and principal occupations of the initial Zurich-designated
directors of SKI are as follows: LAWRENCE W. CHENG, Mythenquai 2, Zurich,
Switzerland, Chief Investment Officer for Investments and Institutional Asset
Management and the corporate functions of Securities and Real Estate for Zurich
and a member of the Corporate Executive Board of Zurich; STEVEN M. GLUCKSTERN,
Mythenquai 2, Zurich, Switzerland, responsible for Reinsurance, Structured
Finance, Capital Market Products and Strategic Investments, and a member of the
Corporate Executive Board of Zurich; ROLF HUEPPI, Mythenquai 2, Zurich,
Switzerland, Chairman of the Board and Chief Executive Officer of Zurich; and
MARKUS ROHRBASSER, Mythenquai 2, Zurich, Switzerland, Chief Financial Officer
and a member of the Corporate Executive Board of Zurich.
The initial Scudder-designated Executive Committee members will be Messrs.
Birdsong and Villani (Chairman). The initial Zurich-designated Executive
Committee members will be Messrs. Cheng and Rohrbasser.
The New SHA requires the approval of a majority of the Scudder-designated
directors for certain decisions, including changing the name of SKI, effecting a
public offering before April 15, 2005, causing SKI to engage substantially in
non-investment management and related business, making material acquisitions or
divestitures, making changes in SKI's capital structure, dissolving or
liquidating SKI, or entering into certain affiliated transactions with Zurich.
The New SHA also provides for various put and call rights with respect to SKI
stock held by current Scudder employees, limitations on Zurich's ability to
purchase other asset management companies outside of SKI, rights of Zurich to
repurchase SKI stock upon termination of employment of SKI personnel, and
registration rights for stock held by continuing Scudder stockholders.
The Transaction is subject to a number of conditions, including approval by
Scudder stockholders; the Revenue Run Rate Percentages of Scudder and ZKI being
at least 75%; Scudder and ZKI having obtained director and stockholder approvals
from U.S.-registered funds representing 90% of the assets of such funds under
management as of June 30, 1997; the absence of any restraining order or
injunction preventing the Transaction, or any litigation challenging the
Transaction that is reasonably likely to result in an injunction or invalidation
of the Transaction; and the continued accuracy of the representations and
warranties contained in the Transaction Agreement. The Transaction is expected
to close during the fourth quarter of 1997.
Subsequent to the execution of the Transaction Agreement, Zurich agreed to cause
ownership of Zurich Investment Management Limited ("ZIML") to be transferred by
Zurich (or a direct or indirect
7
<PAGE> 14
wholly-owned subsidiary of Zurich) to SKI (or a direct or indirect wholly-owned
subsidiary of SKI). ZIML is a sub-adviser for certain portfolios of the Funds.
While the amount of consideration payable to Zurich for ZIML has not yet been
finally agreed upon, it is expected that such consideration would in no event
exceed $50 million, payable in cash or shares of SKI stock or some combination
thereof at the closing of the Transaction or over some period of time after the
closing of the Transaction. Following the transfer, which is expected to take
place at the same time as the closing of the Transaction, ZIML's board of
directors would comprise representatives of Scudder and Zurich. The capital
stock of ZIML initially may be transferred to one or more wholly-owned
subsidiaries of Zurich, but ultimately will be transferred to SKI or one of its
wholly-owned subsidiaries (the "ZIML Transaction"). The ZIML Transaction will
result in an assignment of the subadvisory agreement under the 1940 Act.
ITEM 1. ELECTION OF BOARD OF TRUSTEES
At the Meeting, eight (8) trustees are to be elected to constitute the Board of
the Fund. All the nominees (except Messrs. Daniel Pierce and Edmond Villani)
were elected to the Board of the Fund at a special meeting of shareholders held
on September 19, 1995.
It is intended that the proxies will be voted for the election of the nominees
described below. The nominees, if elected, will take office upon consummation of
the Transaction and their election and qualification is contingent upon
consummation of the Transaction. Each trustee so elected will serve as a trustee
of the Fund from the date of the consummation of the Transaction until the next
meeting of shareholders, if any, called for the purpose of electing trustees and
until the election and qualification of a successor or until such trustee sooner
dies, resigns or is removed as provided in the Agreement and Declaration of
Trust of the Fund ("Declaration of Trust"). If the transaction is not
consummated, the current trustees of the Fund will continue to serve as the
Fund's Board (which are those identified as such below, along with Mr. Stephen
B. Timbers, the president and chief executive officer of ZKI). Since the Fund
does not hold annual meetings, trustees will hold office for an indeterminate
period.
8
<PAGE> 15
All the nominees listed below have consented to serve as trustees of the Fund,
if elected. In case any nominee shall be unable or shall fail to act as a
trustee by virtue of an unexpected occurrence, the proxies may be voted for such
other person(s) as shall be determined by the persons acting under the proxies
in their discretion.
<TABLE>
<CAPTION>
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME
OCCUPATION AND AFFILIATIONS A BOARD MEMBER
------------------------------- -----------------
<S> <C>
James B. Akins (10/15/26) 1995
Consultant on International, Political and
Economic Affairs; formerly, a career United
States Foreign Service Officer; Energy Adviser
for the White House; United States Ambassador to
Saudi Arabia.
Arthur R. Gottschalk (02/13/25) 1989
Retired; formerly, President, Illinois
Manufacturers Association; Trustee, Illinois
Masonic Medical Center; Member, Board of
Governors, Heartland Institute/Illinois;
formerly, Illinois State Senator; formerly, Vice
President, the Reuben H. Donnelly Corp.
Frederick T. Kelsey (04/25/27) 1989
Retired; formerly, consultant to Goldman, Sachs
& Co.; formerly, President, Treasurer and
Trustee of Institutional Liquid Assets and its
affiliated mutual funds; Trustee of the
Benchmark Funds and the Pilot Funds.
*Daniel Pierce (03/18/34) Nominee
Chairman of the Board and Managing Director,
Scudder; Director, Fiduciary Trust Company;
Director, Fiduciary Company Incorporated; Board
member of 14 investment companies advised by
Scudder.
Fred B. Renwick (02/01/30) 1995
Professor of Finance, New York University, Stern
School of Business; Director, TIFF Investment
Program, Inc.; Director, The Wartburg Home
Foundation; Chairman, Investment Committee of
Morehouse College Board of Trustees; Chairman,
[Director] American Bible Society Investment
Committee; formerly, member of the Investment
Committee of Atlanta University Board of
Trustees; formerly, Director of Board of
Pensions Evangelical Lutheran Church in America.
</TABLE>
9
<PAGE> 16
<TABLE>
<CAPTION>
NAME (DATE OF BIRTH), PRINCIPAL YEAR FIRST BECAME
OCCUPATION AND AFFILIATIONS A BOARD MEMBER
------------------------------- -----------------
<S> <C>
John B. Tingleff (05/04/35) 1991
Retired; formerly, President, Tingleff &
Associates (management consulting firm);
formerly, Senior Vice President, Continental
Illinois National Bank & Trust Company.
*Edmond D. Villani (03/04/47) Nominee
President, Chief Executive Officer and Managing
Director, Scudder.
John G. Weithers (08/08/33) 1993
Retired; formerly, Chairman of the Board and
Chief Executive Officer, Chicago Stock Exchange;
Director, Federal Life Insurance Company;
President of the Members of the Corporation and
Trustee, DePaul University; Director, Systems
Imagineering, Inc.
</TABLE>
- ---------------
* Interested persons of Scudder as defined in the Investment Company Act of
1940.
All the nominees, except Messrs. Pierce and Villani, serve as board members of
thirteen Kemper Funds. Mr. Pierce and Mr. Villani have each been nominated to
serve as a board member of thirty-nine Kemper Funds. A "Kemper Fund" is an
investment company for which ZKI, ZKVA or their affiliates serve as investment
manager.
The Board has an audit and governance committee that is composed of Messrs.
Akins, Gottschalk, Kelsey, Renwick, Tingleff and Weithers. The committee of the
Fund met times during the fiscal year ended December 31, 1996. The committee
makes recommendations regarding the selection of independent auditors for the
Fund, confers with the independent auditors regarding the Fund's financial
statements, the results of audits and related matters, seeks and reviews Board
nominees and performs such other tasks as the Board assigns. The committee
proposed the nominees for election by the shareholders; and the Board of
Trustees, including the non-interested trustees, concurred. Shareholders wishing
to submit the name of a candidate for consideration by the committee should
submit their recommendations to the secretary of the Fund.
The Fund pays trustees who are not "interested persons" of the Fund an annual
retainer fee, plus expenses, and an attendance fee for each Board meeting and
committee meeting attended. As reflected above, the trustees currently serve as
Board members of various investment companies for which ZKI or its affiliates
serve as investment manager. Trustees or officers who are "interested persons"
receive no compensation from the Fund. The Board met times during the fiscal
year ended December 31, 1996.
10
<PAGE> 17
Each then current trustee attended 75% or more of the respective meetings of the
Board and the audit and governance committee (if a member thereof) held during
the fiscal year ended December 31, 1996.
The table below shows, for each trustee entitled to receive compensation from
the Fund, the aggregate compensation paid or accrued during the Fund's fiscal
year ended December 31, 1996 and the total compensation that Kemper Funds paid
to each trustee during the calendar year 1996.
<TABLE>
<CAPTION>
TOTAL
AGGREGATE COMPENSATION
COMPENSATION KEMPER FUNDS
PAID BY PAID TO
NAME OF TRUSTEE THE FUND TRUSTEES(2)
--------------- ------------ ------------
<S> <C> <C>
James E. Akins........................ $32,900 $ 94,300
Arthur R. Gottschalk(1)............... $36,000 102,700
Frederick T. Kelsey(1)................ $37,700 106,800
Fred B. Renwick....................... $32,900 94,300
John B. Tingleff...................... $32,900 94,300
John G. Weithers...................... $32,900 94,300
</TABLE>
- ---------------
(1) Includes deferred fees and interest thereon pursuant to deferred
compensation agreements with the Fund. Deferred amounts accrue interest
monthly at a rate equal to the yield of Zurich Money Funds --Zurich Money
Market Fund. Total deferred fees and interest accrued for the latest and
prior fiscal years for this Fund are $69,600 for Mr. Gottschalk and $111,900
for Mr. Kelsey.
(2) Includes compensation for service on the boards of 13 Kemper Funds with 36
fund portfolios during the calendar year 1996. Each trustee currently serves
as a Board member of 13 Kemper Funds with 46 fund portfolios.
FUND OFFICERS. Information about the executive officers of the Fund, with their
respective dates of birth and terms as Fund officers indicated, is set forth
below.
Daniel J. Bukowski (05/06/63), vice president of the Fund since 02/28/92, is
senior vice president and director of quantitative research.
David H. Burshtan (10/24/61), vice president of the Fund since ,
is vice president of ZKI.
Robert S. Cessine (01/05/50), vice president of the Fund since ,
is senior vice president of ZKI since January 1993; formerly, senior corporate
bond analyst at an investment management company.
Phillip J. Collora (11/15/45) vice president of the Fund since 02/28/92, and
secretary of the Fund since 03/02/95, is senior vice president and assistant
secretary of ZKI.
11
<PAGE> 18
Jerome L. Duffy (06/29/36), treasurer of the Fund since 01/22/87, is senior vice
president of ZKI.
Thomas H. Forester ( ), vice president of the Fund since , is
.
William M. Knapp (04/23/61), vice president of the Fund since , is
first vice president of ZKI.
Gary A. Langbaum (12/16/48), vice president of the Fund since 06/20/95, is
executive vice president of ZKI.
Maureen P. Lentz (08/26/61), vice president of the Fund since , is
vice president of ZKI.
Charles R. Manzoni, Jr. (01/23/47), vice president of the Fund since 09/04/96,
is executive vice president, secretary and general counsel of ZKI; secretary,
ZKI Holding Corp.; secretary, ZKI Agency, Inc., and formerly, Partner, Gardner,
Carton & Douglas (attorneys).
Michael A. McNamara (12/28/44), vice president of the Fund since 02/28/92, is
senior vice president of ZKI.
John E. Neal (03/09/50), vice president of each Fund since , is
president of Kemper Funds Group, a unit of ZKI, and director of ZKI, ZKVA and
Zurich Kemper Distributors, Inc. ("ZKDI").
Robert C. Peck, Jr. (10/01/46), vice president of the Fund since ,
is executive vice president, chief investment officer-fixed income of ZKI, and
formerly, executive vice president and chief investment officer of an
unaffiliated investment management firm.
Frank J. Rachwalski, Jr. (03/26/45), vice president of the Fund since 03/02/95,
is senior vice president of ZKI.
Harry E. Resis, Jr. (11/24/45), vice president of the Fund since 03/02/95, is
senior vice president of ZKI.
Steven H. Reynolds (09/11/43), vice president of the Fund since 09/ /95, is
executive vice president and chief investment officer-equities of ZKI.
Kurt R. Stalzer (05/01/58), vice president of the Fund since , is
senior vice president of ZKI.
Steven T. Stokes (07/18/62) vice president of the Fund since , is
.
Stephen B. Timbers (08/08/44), president of the Fund since 03/11/95, is
president, chief executive officer, chief investment officer and director of ZKI
and director of ZKDI, ZKVA and LTV Corporation. Mr. Timbers is also Trustee of
the Fund.
Richard L. Vandenberg (11/16/49), vice president of the Fund since 03/ /96 is
senior vice president of ZKI; prior thereto, senior vice president and portfolio
manager of an investment management firm.
12
<PAGE> 19
The officers of the Fund are elected by the Board of the Fund on an annual basis
to serve until their successors are elected and qualified. It is anticipated
that, after consummation of the Transaction, the Board of the Fund will elect
new officers who are expected to include persons currently affiliated with
Scudder.
SHAREHOLDINGS. As of , 1997, shares of each series of the Fund
were owned of record by the Participating Insurance Companies as set forth on
Exhibit A.
ITEM 2. SELECTION OF INDEPENDENT AUDITORS
A majority of the members of the Board who are not "interested" persons of the
Fund has selected Ernst & Young LLP, independent auditors, to audit the books
and records of the Fund for the current fiscal year. This firm has served in
this capacity for the Fund since the Fund was organized and has no direct or
indirect financial interest in the Fund except as independent auditors. The
selection of Ernst & Young LLP as independent auditors of the Fund is being
submitted to the shareholders for ratification. A representative of Ernst &
Young LLP is expected to be present at the Meeting and will be available to
respond to any appropriate questions raised at the Meeting and may make a
statement.
BOARD OF TRUSTEES RECOMMENDATION
The Board recommends that shareholders vote FOR the ratification of the
selection of independent auditors.
ITEM 3. NEW INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Zurich Kemper Investments, Inc. ("ZKI") is the investment adviser and manager
for each series of INFS other than KVP and KSCVP. Zurich Kemper Advisors, Inc.
("ZKVA") is the investment adviser and manager for KVP and KSCVP. ZKI and its
indirect parent, Zurich Insurance Company ("Zurich"), entered into a transaction
agreement with Scudder, Stevens & Clark, Inc. ("Scudder") whereby Zurich will
acquire approximately 70% of Scudder. Upon completion of the Transaction,
Scudder will change its name to Scudder Kemper Investments, Inc. ("SKI") and ZKI
and ZKVA will be combined with SKI.
As discussed above, consummation of the Transaction would constitute an
"assignment," as that term is defined in the Investment Company Act of 1940 (the
"1940 Act"), of the Fund's current investment management agreement with ZKI (or
ZKVA in the case of KVP and KSCVP). As required by the 1940 Act, each current
investment management agreement provides for its automatic termination in the
event of its assignment.
13
<PAGE> 20
In anticipation of the Transaction, a new investment management agreement
("management agreement") between the Fund and SKI is being proposed for approval
by shareholders of the Fund. (Depending on the timing of the combination of the
Scudder, ZKI and ZKVA organizations, the new investment management agreement may
initially be between the Fund and ZKI (or ZKVA in the case of KVP and KSCVP) for
some period following the Transaction and then be transferred to SKI without
further action required on the part of shareholders of the Fund. SKI, ZKI or
ZKVA as party to the new investment management agreement, is sometimes referred
to in this proxy statement as the "investment manager.") A copy of the form of
the new management agreement is attached hereto as Exhibit B.
BOARD OF TRUSTEES RECOMMENDATION
The Board of the Fund met on July 8, 1997, July 15, 1997, August 18-19, 1997 and
September 19-20, 1997 to consider the Transaction and its anticipated effects
upon ZKI and ZKVA and the investment management and other services provided to
the Fund by ZKI, ZKVA and its affiliates. In addition, the Independent Trustees
also met separately with counsel on a number of occasions to discuss the
Transaction. On September 20, 1997 the Board of the Fund, including a majority
of the Board members who are not parties to such agreement or interested persons
of any such party, voted unanimously to approve the new management agreement and
to recommend it to shareholders for their approval.
For information about the Board's deliberations and the reasons for its
recommendation, please see "Board of Trustees Evaluation" near the end of this
Item 3.
The Board recommends that shareholders vote FOR approval of the new management
agreement.
THE CURRENT INVESTMENT MANAGEMENT AGREEMENT
The current management agreement provides that the Fund's investment manager
acts as investment adviser, manages the Fund's investments, administers the
Fund's business affairs, furnishes offices, necessary facilities and equipment,
provides clerical, bookkeeping and administrative services, provides shareholder
and information services and permits any of its officers or employees to serve
without compensation as trustees or officers of the Fund if duly elected to such
positions. Under the current management agreement, the Fund agrees to assume and
pay the charges and expenses of its operations including, by way of example, the
compensation of the trustees other than those affiliated with the investment
manager, charges and expenses of independent auditors, of legal counsel, of any
transfer or dividend disbursing agent, of any registrar of the Fund
14
<PAGE> 21
and of the custodian (including fees for safekeeping of securities), costs of
calculating net asset value, all costs of acquiring and disposing of portfolio
securities, interest, if any, on obligations incurred by the Fund, costs of
share certificates, membership dues in the Investment Company Institute or any
similar organization, reports and notices to shareholders, other like
miscellaneous expenses and all taxes and fees to federal, state or other
governmental agencies.
For the services and facilities furnished, the Fund pays an investment
management fee as a percentage of average daily net assets, payable monthly at
the annual rates shown below. Exhibit F reflects the management fees paid by the
Fund for the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
SERIES MANAGEMENT FEE
------ --------------
<S> <C>
KMMP............................................. .50%
KTRP............................................. .55%
KHYP............................................. .60%
KGP.............................................. .60%
KGSP............................................. .55%
KIP.............................................. .75%
KSCGP............................................ .65%
KIGBP............................................ .60%
KVP.............................................. .75%
KSCVP............................................ .75%
KVGP............................................. .75%
KH20P............................................ .60%
KH10P............................................ .60%
KH5P............................................. .60%
KBCP............................................. .65%
KGIP............................................. .75%
</TABLE>
The management agreement provides that the Fund's investment manager will
reimburse the Fund should the operating expenses of the Fund, including the
investment management fee, but excluding taxes, interest, distribution fees,
extraordinary expenses, brokerage commissions or transaction costs and any other
properly excludable expenses, exceed on an annual basis the most restrictive
applicable state expense limitation. Currently, the Fund is not subject to any
state expense limitation.
The management agreement provides that the Fund's investment manager shall not
be liable for any error of judgment or of law, or for any loss suffered by the
Fund in connection with the matters to which the management agreement relates,
except a loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Fund's investment manager in the performance of its
obligations and duties or by
15
<PAGE> 22
reason of its reckless disregard of its obligations and duties under the
management agreement.
The management agreement may be terminated for the Fund or series thereof
without penalty upon sixty (60) days written notice by either party, or by a
majority vote of the outstanding shares of the Fund or series thereof, and
automatically terminates in the event of its assignment.
ZKI or ZKVA, as the case may be, has acted as investment adviser and manager for
each series since it commenced public offering of its shares as shown below.
Also shown is the date of each current management agreement, the date when the
current management agreement was last approved by the trustees and shareholders
of each series, the purpose of the last submission to shareholders of the
current management agreement, and the date to which the current management
agreement continues.
<TABLE>
<CAPTION>
APPROVAL OF CURRENT CURRENT
COMMENCEMENT DATE OF AGREEMENT BY AGREEMENT
OF INVESTMENT CURRENT ----------------------- CONTINUED BY
SERIES OPERATIONS AGREEMENT TRUSTEES SHAREHOLDERS TRUSTEES TO
------ ------------- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
KMMP................. 09/03/87
KTRP................. 09/03/87
KHYP................. 09/03/87
KGP.................. 09/03/87
KGSP................. 09/03/87
KIP.................. 01/06/92
KSCGP................ 05/01/94
KIGBP................ 05/01/96
KVP.................. 05/01/96
KSCVP................ 05/01/96
KVGP................. 05/01/96
KH20P................ 05/01/96
KH10P................ 05/01/96
KH5P................. 05/01/96
KBCP................. 05/01/97
KGIP................. 05/01/97
</TABLE>
- ---------------
(a) The current management agreement was last submitted to shareholders for
approval in connection with the Zurich/Kemper merger.
(b) The current management agreement was last submitted to shareholders for
approval by the initial shareholder (i.e., ZKI) immediately prior to the
commencement of the public offering of shares.
SUB-ADVISER--ZIML
KTRP, KHYP, KGP, KIP, KSCGP, KIGBP, KVGP, KH20P, KH10P, KH5P, KBCP and KGIP each
use the investment management services of
16
<PAGE> 23
Zurich Investment Management Limited ("ZIML"), 1 Fleet Place, London, UK, ECM4
7RQ, an indirect subsidiary of Zurich and an affiliate of ZKI, with respect to
investments in foreign securities pursuant to the sub-advisory agreements
between ZKI and ZIML described below. The current sub-advisory agreements are
dated December 1, 1996, and will continue, unless replaced or otherwise
terminated, until April 1, 1998.
As with the investment management agreements, the sub-advisory agreements with
ZIML will terminate upon consummation of the Transaction. As discussed below,
new sub-advisory agreements are proposed for KIP and KGIP (series of the Fund).
(See "Item 4. New Sub-Advisory Agreement with Zurich Investment Management
Limited.") For KTRP, KHYP, KGP, KSCGP, KIGBP, KVGP, KH20P, KH10P, KH5P and KBCP
however, new sub-advisory agreements are not being proposed; and the investment
manager would assume responsibility for the portion of those Fund's assets
invested in foreign securities. In addition, as described above, it is expected
that ownership of ZIML will be transferred to SKI or to a direct or indirect
wholly-owned subsidiary of SKI upon consummation of the Transaction.
Under the terms of the Sub-Advisory Agreement for a Fund, ZIML renders
investment advisory and management services with regard to that portion of the
Fund's portfolio as may be allocated to ZIML by ZKI from time to time for
management of foreign securities, including foreign currency transactions and
related investments. For its services, ZIML receives from ZKI (not from the
Funds) a monthly fee at the annual rate of .35% for KTRP, KGP, KIP, KSCGP, KVGP,
KH20P, KH10P, KH5P and KBCP and .30% for KHYP, KIGBP, and KGIP on the portion of
the average daily net assets allocated by ZKI to ZIML for management.
Each Sub-Advisory Agreement provides that ZIML will 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 the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
ZIML in the performance of its duties or from reckless disregard by ZIML of its
obligations and duties under the Sub-Advisory Agreement.
Each Sub-Advisory Agreement continues in effect from year to year so long as its
continuation is approved at least annually (a) by a majority of the Board
members who are not parties to such agreement or interested persons of any such
party except in their capacity as Board members of the Fund and (b) by the
shareholders or the Board. Each Sub-Advisory Agreement may be terminated at any
time for a Fund upon 60 days notice by ZKI, ZIML or the Board or by a majority
vote of the outstanding shares of the Fund, and will terminate automatically
upon assignment or upon the termination of the Fund's investment management
agreement.
17
<PAGE> 24
No sub-advisory fees were paid by ZKI to ZIML for each Fund's 1996 fiscal year,
although in prior fiscal years ZKI has paid ZIML for its services to ZKI with
respect to foreign securities investments of certain Funds.
SUB-ADVISER--ZKVA
KVGP, KH20P, KH10P and KH5P use the investment management services of Zurich
Kemper Value Advisors, Inc. ("ZKVA") with respect to investments in the value
portion of KVGP, KH20P, KH10P and KH5P pursuant to the sub-advisory agreement
between ZKI and ZKVA described below. ZKVA is a wholly-owned subsidiary of ZKI
and is located at 280 Park Avenue, New York, New York 10017. The current sub-
advisory agreement is dated December 1, 1996, was approved on ,
19 , by ZKI as the initial shareholder, was last approved for continuation by
the Board on March 11, 1997, and will continue, unless replaced or otherwise
terminated, until April 1, 1998.
As with the investment management agreements, upon consummation of the
Transaction, the sub-advisory agreement with ZKVA will terminate. As discussed
below, a new sub-advisory agreement with ZKVA is being proposed. (See "Item 5.
New Sub-Advisory Agreement with Zurich Kemper Value Advisors, Inc.") However, it
is expected that, upon consummation of the Transaction or soon thereafter, ZKVA
will be combined with SKI, the separate sub-advisory agreement with ZKVA will be
terminated, and all ZKVA functions will be provided by SKI.
Under the terms of the Sub-Advisory Agreement, ZKVA manages the value portion of
KVGP, KH20P, KH10P and KH5P and provides such investment advice, research and
assistance as ZKI may, from time to time, reasonably request. For its services,
ZKVA receives from ZKI (not from the Fund) a monthly fee at the annual rate of
.25% of average daily net assets, in the case of KVGP, and .25% on the portion
of average daily net assets of KH20P, KH10P and KH5P allocated by ZKI to ZKVA.
The Sub-Advisory Agreement provides that ZKVA will not be liable for any error
of judgment or mistake of law or for any loss suffered by a Fund in connection
with matters to which the Sub-Advisory Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
ZKVA in the performance of its duties or from reckless disregard by ZKVA of its
obligations and duties under the Sub-Advisory Agreement.
The Sub-Advisory Agreement continues by its terms from year to year if such
continuance is specifically approved at least annually (a) by a majority of
Board members who are not parties to such agreement or interested persons of any
such party except in their capacity as Board members of the Fund, and (b) by the
shareholders or the Board of the Fund. The Sub-Advisory Agreement may be
terminated at any time upon
18
<PAGE> 25
60 days' notice by ZKI, ZKVA or the Board of the Fund or by a majority vote of
the outstanding shares of a Fund, and will terminate automatically upon
assignment or upon termination of the Fund's investment management agreement.
The sub-advisory fees paid by ZKI to ZKVA for each series for the fiscal year
ended , 199 were $ , $ , $ , and
$ for KVGP, KH20P, KH10P and KH5P, respectively.
NEW INVESTMENT MANAGEMENT AGREEMENT
The new investment management agreement for the Fund is substantially similar to
the current investment management agreement. While the form of the agreement is
different (i.e., a form generally used by Scudder), there is no material
difference in the substance of the obligations of the investment manager under
the agreement except that, under a separate agreement with Scudder Fund
Accounting Corporation ("SFAC"), a subsidiary of Scudder, SFAC, rather than SKI
as investment manager, will compute the net asset value for each Fund. SFAC will
not charge the Fund for this service and has no current intention to do so;
however, subject to Board approval, at some time in the future, SFAC may seek
payment for its services under the agreement.
The new management agreement will be dated as of the date of the consummation of
the Transaction, which is expected to occur in the fourth quarter of 1997, but
in no event later than February 28, 1998. The new management agreement will be
in effect for an initial term ending on the same date as would the current
management agreement but for the Transaction, and may continue thereafter from
year to year if specifically approved at least annually by the vote of "a
majority of the outstanding voting securities" of the Fund, as defined under the
1940 Act, or by the Board and, in either event, the vote of a majority of the
trustees who are not parties to the agreement or interested persons of any such
party, cast in person at a meeting called for such purpose.
BOARD OF TRUSTEES EVALUATION
On June 27, 1997, the Board of the Fund was informed of the Transaction.
Thereafter, the Board was given extensive information about the Transaction and
Scudder. The Board met with senior management personnel of Zurich and Scudder
and had extended discussions regarding Zurich's and Scudder's plans for ZKI,
ZKVA, SKI and the Fund. Throughout the process, the Independent Trustees of the
Board had the assistance of legal counsel, who prepared, among other things, an
analysis of the Board's fiduciary obligations. The Board met on July 8, 1997,
July 15, 1997, August 18-19, 1997 and September 19-20, 1997 to consider the
Transaction and its effects on the Fund. The Independent Trustees
19
<PAGE> 26
also met separately with counsel on a number of occasions to discuss the
Transaction. As a result of its review and consideration of the Transaction and
the proposed new management agreements, at its meeting on September 20, 1997,
the Board of the Fund voted unanimously to approve the new management agreement
and to recommend it to the shareholders of the Fund for their approval.
In connection with its review, the Board obtained substantial information
regarding: the management, financial position and business of Scudder; the
history of Scudder's business and operations; the investment performance of the
investment companies and private accounts advised by Scudder; the anticipated
effect of the Transaction on the Fund and its shareholders; and future plans of
Zurich and Scudder with respect to ZKI, ZKVA, SKI and the Fund. The Board also
received information regarding the terms of the Transaction and comprehensive
financial information, including: employment agreements with senior Scudder
executives; incentive stock compensation to be given to key ZKI personnel; and
anticipated SKI management and board of directors.
In connection with their deliberations, the Board of the Fund obtained certain
assurances from Zurich and Scudder, including the following:
- - Zurich and Scudder have provided to the Board such information as is
reasonably necessary to evaluate the new management and other agreements.
- - Zurich looks upon SKI as the core of Zurich's global asset management
strategy. With that focus, Zurich will devote to SKI and its affairs all
attention and resources that are necessary to provide for the Fund top quality
investment management, shareholder, administrative and product distribution
services.
- - Scudder looks upon the Kemper Funds as a core part of Scudder's global asset
management strategy. With that focus, Scudder will devote to the Kemper Funds
and their affairs all attention and resources that are necessary to provide
for the Fund top quality investment management, shareholder, administrative
and product distribution services.
- - The Transaction will not result in any change in the Fund's investment
objectives or policies.
- - The Transaction is not expected to result in any adverse change in the
investment management or operations of the Fund; and neither Zurich nor
Scudder plans to make any material change in the manner in which investment
advisory services or other services are rendered to the Fund which has the
potential to have a material adverse effect upon the Fund.
20
<PAGE> 27
- - Zurich and Scudder are committed to the continuance, without interruption, of
services to the Fund of the type and quality currently provided by ZKI and its
subsidiaries, or superior thereto.
- - Zurich and Scudder plan to maintain or enhance the SKI facilities and
organization.
- - In order to retain and attract key personnel, Zurich and Scudder intend for
SKI to maintain overall compensation policies and practices at market levels
or better.
- - Zurich and Scudder intend to maintain the distinct brand identity of the
Kemper and Scudder Funds and are committed to strengthening and enhancing both
brands and the distribution channels for both families of Funds, while
maintaining their separate brand identity.
- - Scudder has in place a detailed and comprehensive plan of action to
effectively deal with the year 2000 issue for all SKI operations. The Kemper
Funds will not be transferred from their current systems unless certain
conditions are met.
- - Zurich and Scudder will promptly advise the Board of decisions materially
affecting the SKI organization as they relate to the Fund. Neither this, nor
any of the other above commitments will be altered by Zurich or Scudder
without the Board's prior consideration.
Zurich and Scudder assured the Board that they intend to comply with Section
15(f) of the 1940 Act. Section 15(f) provides a non-exclusive safe harbor for an
investment adviser to an investment company or any of its affiliated persons 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 such investment adviser.
The composition of the Board of the Fund, currently and as proposed, would be in
compliance with this provision of Section 15(f). (See Item 1--"Election of Board
of Trustees.") 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). Zurich and
Scudder
21
<PAGE> 28
are not aware of any express or implied term, condition, arrangement or
understanding that would impose an "unfair burden" on any Fund as a result of
the Transaction. Zurich and Scudder have agreed that they, and their affiliates,
will take no action that would have the effect of imposing an "unfair burden" on
any Fund as a result of the Transaction. In furtherance thereof, ZKI has
undertaken to pay the costs of preparing and distributing proxy materials to and
of holding the meetings of the Fund's shareholders as well as other fees and
expenses in connection with the Transaction, including the fees and expenses of
legal counsel to the Fund and the Independent Trustees, and Zurich has agreed to
indemnify the Fund and the Independent Trustees for and against any liability
and expenses based upon any action or omission by the Independent Trustees in
connection with their consideration of and action with respect to the
Transaction. In addition, Scudder has agreed to indemnify the Fund and the
Independent Trustees for and against any liability and expenses based upon any
misstatements or omissions by Scudder to the Independent Trustees in connection
with their consideration of the Transaction.
In evaluating the new management agreement, the Board took into account that the
fees and expenses payable by the Fund under the new management agreement are the
same as under the current management agreement, that the services provided to
the Fund are the same (except for services to be provided under a separate Fund
accounting Agreement as described above) and that the other terms are
substantially similar. The Board also took into consideration the extent to
which portfolio managers and research personnel would continue their functions
with SKI. The Board also considered Scudder's representation that the Fund's
shareholder service providers and the terms of the shareholder service
agreements were not being proposed to be changed. The Board noted that, in
previously approving the continuation of the current management agreement, the
Board had considered a number of factors, including the nature and quality of
services provided by ZKI and ZKVA; investment performance, both of the Fund
itself and relative to that of competitive investment companies; investment
management fees and expense ratios of the Fund and competitive investment
companies; ZKI profitability from managing the Fund; fall-out benefits to ZKI
from its relationship to the Fund, including revenues derived from services
provided to the Fund by affiliates of ZKI; and the potential benefits to ZKI and
to the Fund and its shareholders of receiving research services from
broker/dealer firms in connection with the allocation of portfolio transactions
to such firms. The Board also considered that Scudder has a current policy of
not paying higher brokerage commissions solely for receipt of market,
statistical and other research services, and that SKI is expected to adopt the
same policy.
The Board discussed the Transaction with the senior management of ZKI, Scudder
and Zurich and among themselves. The Board considered that
22
<PAGE> 29
Zurich is a large, well-established company with substantial resources, and, as
noted above, has undertaken to devote such resources to SKI as are necessary to
provide the Fund with top quality services. The Board also considered that
Scudder is a large, well-established investment advisory firm with a substantial
number of highly rated funds.
As a result of their review and consideration of the Transaction and the new
management agreement, at its meeting on September 20, 1997, the Board of the
Fund voted unanimously to approve the new management agreement and to recommend
it to the shareholders of the Fund for their approval.
The Board of the Fund recommends that shareholders vote FOR approval of the new
management agreement.
ITEM 4. NEW SUB-ADVISORY AGREEMENT WITH
ZURICH INVESTMENT MANAGEMENT LIMITED
(FOR KIP AND KGIP ONLY.)
Zurich Investment Management Limited ("ZIML") is the sub-adviser for KIP and
KGIP. As noted above, the consummation of the Transaction and the ZIML
Transaction each would constitute an "assignment," as defined in the 1940 Act,
of each Fund's current sub-advisory agreement with ZIML. As required by the 1940
Act, each current sub-advisory agreement provides for its automatic termination
in the event of its assignment. In anticipation of the Transaction and the ZIML
Transaction, a new sub-advisory agreement with ZIML is being proposed for
approval by the shareholders of KIP and KGIP. The new sub-advisory agreement
with ZIML is on the same terms as the current sub-advisory agreement. A vote in
favor of Item 4 will approve both the new sub-advisory agreement with ZIML to be
effective at the time of the Transaction as well as the sub-advisory agreement
with ZIML to be effective at the time of the ZIML Transaction. A copy of the new
sub-advisory agreement is attached hereto as Exhibit C.
A new sub-advisory agreement will be dated as of the date of the consummation of
the Transaction or the ZIML Transaction and will be in effect for an initial
term ending on the same date as would the current sub-advisory agreement but for
the Transaction (or ZIML Transaction), and may continue thereafter from year to
year if such continuance is specifically approved at least annually by the vote
of a "majority of the outstanding voting securities" of each of the Funds, as
defined under the 1940 Act, or the Board, including, in either event, the vote
of a majority of the Board members who are not parties to the agreement or
interested persons of any such party, cast in person at a meeting called for
such a purpose.
23
<PAGE> 30
BOARD OF TRUSTEES RECOMMENDATION
The Board of the Fund recommends that shareholders of KIP and KGIP vote FOR
approval of the new sub-advisory agreement with ZIML.
ITEM 5. NEW SUB-ADVISORY AGREEMENT WITH
ZURICH KEMPER VALUE ADVISORS, INC.
(FOR KVGP, KH20P, KH10P AND KH5P ONLY.)
Zurich Kemper Value Advisors, Inc. ("ZKVA") is the sub-adviser for KVGP, KH20P,
KH10P and KH5P. As noted above, the consummation of the Transaction would
constitute an "assignment," as defined in the 1940 Act, of KHF's current
sub-advisory agreement with ZKVA. As required by the 1940 Act, the current
sub-advisory agreement provides for its automatic termination in the event of
its assignment. In anticipation of the Transaction, a new sub-advisory agreement
with ZKVA is being proposed for approval by the shareholders of KVGP, KH20P,
KH10P and KH5P. The new sub-advisory agreement with ZKVA is on the same terms as
the current sub-advisory agreement. A copy of the new sub-advisory agreement is
attached hereto as Exhibit D.
The new sub-advisory agreement for each Fund will be dated as of the date of the
consummation of the Transaction and will be in effect for an initial term ending
on the same date as would the current sub-advisory agreement but for the
Transaction, and may continue thereafter from year to year if such continuance
is specifically approved at least annually by vote of a "majority of the
outstanding voting securities" of the Fund, as defined under the 1940 Act, or
the Board, including, in either event, the vote of a majority of the Board
members who are not parties to the agreement or interested persons of any such
party, cast in person at a meeting called for such purpose. It is expected,
however, that upon consummation of the Transaction or soon thereafter, ZKVA will
be combined with SKI, the separate sub-advisory agreement with ZKVA will be
terminated and all ZKVA functions will be provided by SKI.
BOARD OF TRUSTEES RECOMMENDATION
The Board of the Fund recommends that shareholders of KVGP, KH20P, KH10P and
KH5P vote FOR approval of the new sub-advisory agreement with ZKVA.
ITEM 6. AMENDMENT OF AGREEMENT AND DECLARATION OF TRUST
The Board, including a majority of the non-interested Board Members (as defined
in the 1940 Act), considered and approved, subject to shareholder approval, an
amendment to each Fund's Agreement and Declaration of Trust that would allow the
establishment of a multiple
24
<PAGE> 31
class fund structure that would permit each Fund to provide investors with the
option of purchasing shares in various ways including, by way of example: (i)
with a conventional front-end sales load and a service fee and (ii) without a
front-end sales load, but subject to a contingent deferred sales charge as well
as a distribution fee pursuant to a Rule 12b-1 Plan and a service fee. A
multi-class fund structure would permit investors to choose the method of
purchasing shares that is deemed most beneficial given the length of time the
investor expects to hold the shares and other relevant circumstances. While
neither the Board nor ZKI has determined that the Funds should offer a
multi-class fund structure, the Board believes it to be in the best interests of
each Fund to have the flexibility to adopt such a structure at a future date.
Each share of a class of a Series would represent an identical legal interest in
the investment portfolio of that Series and have the same rights, except that
each class may bear certain expenses specifically related to the distribution of
its shares and each class may bear certain other expenses specifically allocated
to that class such as transfer agency fees and administrative services fees.
Although the legal rights of the classes would be identical, it is likely that
the different expenses borne by each class would result in different net asset
values and dividends. Each class would have exclusive voting rights with respect
to any plan of distribution adopted for such class pursuant to Rule 12b-1 under
the 1940 Act. The classes would also have different exchange privileges. The
implementation of a multi-class fund structure would not alter the rights and
privileges of the current shareholders, nor would it affect the net asset value
of a current shareholder's investment.
If the shareholders approve this proposal, the Declaration of Trust will be
amended to allow for the creation of separate classes of shares and to define
the effects of the creation of separate classes. The principal change is that
Article , Section , entitled " ," would be amended to
provide, in part, that "The Trustees may, without Shareholder approval, divide
the Shares of any series into two or more classes, shares of each such class
having such preferences and special or relative rights or privileges (including
conversion rights, if any) as the Trustees may determine." Thereafter, in
general, references to "series" would be changed as appropriate to reflect the
existence of series and classes and to recognize the preferences, rights and
privileges that may arise as a result of the creation of a particular class. By
the amendment, shareholders would be giving the Board authority, without further
shareholder approval, to create separate classes of shares in the future with
such preferences, rights and privileges as the Board may determine. A class of
shares may or may not be available to any particular group or type of investor.
In connection with the above amendment of the Declaration of Trust, a clarifying
amendment to the Declaration of Trust will be made. The
25
<PAGE> 32
Declaration of Trust currently provides that shareholders may vote to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Fund or the
shareholders. If this proposal is approved, the Declaration of trust will be
amended to delete this provision. This deletion would clarify that issues
concerning the institution or maintenance of class action or derivative legal
proceedings related to the Fund are not subject to shareholder consideration but
will be considered by the Board, the appropriate judicial forum or the
plaintiffs, depending upon the circumstances.
BOARD OF TRUSTEES RECOMMENDATION.
The Board of the Fund recommends that shareholders vote FOR approval of the
amendment of the Fund's Agreement and Declaration of Trust.
OTHER INFORMATION
ZKI. Zurich Kemper Investments, Inc. ("ZKI"), 222 South Riverside Plaza,
Chicago, Illinois 60606, is the investment manager of each Fund and provides
each Fund with continuous professional investment supervision. ZKI is one of the
largest investment managers in the country and has been engaged in the
management of investment funds for more than forty-nine years. ZKI and its
affiliates provide investment advice and manage investment portfolios for the
Kemper Funds, affiliated insurance companies and other corporate, pension,
profit-sharing and individual accounts representing approximately $85 billion
under management. ZKI acts as investment manager or principal underwriter for 32
open-end and seven closed-end investment companies, with 86 separate investment
portfolios, representing more than 2.5 million shareholder accounts. ZKI is an
indirect subsidiary of Zurich Insurance Company, a leading internationally
recognized provider of insurance and financial services in property/casualty and
life insurance, reinsurance and structured financial solutions as well as asset
management ("Zurich").
The investment companies to which ZKI and its affiliates render investment
management services, and the related management fees, are identified in Exhibit
E.
26
<PAGE> 33
The names, addresses and principal occupations of the principal executive
officer and the directors of ZKI are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Stephen B. Timbers, Chief Executive President, Chief Executive
Officer and Director Officer and Chief Investment
222 South Riverside Plaza Officer, ZKI
Chicago, Illinois 60606
John E. Neal, Director President, Kemper Funds Group
222 South Riverside Plaza
Chicago, Illinois 60606
William E. Chapman II, Director President, Kemper Retirement
222 South Riverside Plaza Plans Group
Chicago, Illinois 60606
</TABLE>
ZIML. Zurich Investment Management Limited ("ZIML"), 1 Fleet Place, London, U.K.
EC4M 7RQ, is an indirect subsidiary of Zurich. The names, addresses and
principal occupations of the principal executive officer and the directors of
ZIML are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
</TABLE>
[insert]
ZKVA. Zurich Kemper Value Advisors, Inc. ("ZKVA"), 280 Park Avenue, New York,
New York 10017, the investment manager for KVP and KSCVP and sub-adviser for
KVGP, KH20P, KH10P and KH5P, is a wholly-owned subsidiary of ZKI. The names,
addresses and principal occupations of the principal executive officer and the
directors of ZKVA are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
George Keith, Chief Executive Officer President and Chief Executive
280 Park Avenue Officer, ZKVA
40th Floor
New York, New York 10017
Stephen B. Timbers, Director President, Chief Executive
222 South Riverside Plaza Officer and Chief Investment
Chicago, Illinois 60606 Officer, ZKI
John E. Neal, Director President, Kemper Funds Group
222 South Riverside Plaza
Chicago, Illinois 60606
</TABLE>
CUSTODIAN AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary Trust Company
("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105,
27
<PAGE> 34
as custodian, and State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02210, as sub-custodian, have custody of all securities
and cash of the Fund maintained in the United States. The Chase Manhattan Bank,
Chase Metro Tech Center, Brooklyn, New York 11245, as custodian, has custody of
all securities and cash of the Fund held outside the United States. They attend
to the collection of principal and income, and payment for and collection of
proceeds of securities bought and sold by the Fund. IFTC is also the Fund's
transfer agent and dividend-paying agent.
IFTC receives an annual fee as custodian for the Fund, payable monthly, of $0.85
per $1,000 of average monthly net assets of the Fund plus certain transaction
charges and out-of-pocket expense reimbursement. IFTC's fee is reduced by
certain earnings credits in favor of the Fund.
For the fiscal year ended December 31, 1996, IFTC remitted shareholder service
fees to ZKSC as set forth in Exhibit G.
UNDERWRITER. Zurich Kemper Distributors, Inc. ("ZKDI"), an affiliate of ZKI and
ZKVA, serves as distributor and principal underwriter for the Fund pursuant to
an underwriting agreement. ZKDI bears all its expenses of providing services
pursuant to the agreement. ZKDI provides for the preparation of advertising or
sales literature, and bears the cost of printing and mailing prospectuses to
persons other than shareholders and contract owners. ZKDI bears the cost of
qualifying and maintaining the qualification of the Fund shares for sale under
the securities laws of Massachusetts and the Fund bears the expense of
registering its shares with the Securities and Exchange Commission. ZKDI will
pay all fees and expenses in connection with its qualification and registration
as a broker or dealer under Federal and state laws, a portion of the toll free
telephone services and of computer terminals, and of any activity which is
primarily intended to result in the sale of shares issued by the Fund, unless a
plan pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan") is in effect that
provides the Fund shall bear some or all of such expenses. It is expected that
ZKDI will continue to serve as the Fund's underwriter after consummation of the
Transaction.
ZKDI currently offers shares of each series of the Fund continuously to the
separate accounts of Participating Insurance Companies where permitted by
applicable law. The underwriting agreement provides that ZKDI accepts orders for
shares at net asset value as no sales commission or load is charged. ZKDI has
made no firm commitment to acquire shares of the Fund.
NOTE: Although the Fund does not currently have a 12b-1 Plan and shareholder
approval would be required in order to adopt one, the underwriting agreement
provides that the Fund will also pay those fees and expenses permitted to be
paid or assumed by the Fund pursuant to a
28
<PAGE> 35
12b-1 Plan, if any, adopted by the Fund, notwithstanding any other provision to
the contrary in the underwriting agreement, and the Fund or a third party will
pay those fees and expenses not specifically allocated to ZKDI in the
underwriting agreement.
PORTFOLIO TRANSACTIONS. ZKI and its affiliates furnish investment management
services for the Kemper Funds and other clients including affiliated insurance
companies. ZKI and its affiliates share some common research and trading
facilities. Zurich Investment Management Limited ("ZIML") is the sub-adviser for
KIP and KGIP. ZIML is the sub-adviser for other Kemper Funds as well. Zurich
Kemper Value Advisors, Inc. ("ZKVA") is the investment manager for KVP and KSCVP
and the sub-adviser for KVGP, KH20P, KH10P and KH5P. ZKVA is the investment
manager and sub-adviser for other Kemper Funds as well. (Each of ZKI, ZIML and
ZKVA are referred to as an "Adviser.") At times investment decisions may be made
to purchase or sell the same investment securities for the Fund and for one or
more of the other clients managed by an Adviser or its affiliates. When two or
more of such clients are simultaneously engaged in the purchase or sale of the
same security, the transactions are allocated as to amount and price in a manner
considered equitable to each and so that each receives, to the extent
practicable, the average price of such transactions.
National securities exchanges have established limitations governing the maximum
number of options in each class that may be written by a single investor or
group of investors acting in concert. An exchange may order the liquidation of
positions found to be in violation of these limits, and it may impose certain
other sanctions. These position limits may restrict the number of options the
Fund will be able to write on a particular security.
The above mentioned factors may have a detrimental effect on the quantities or
prices of securities available to the Fund. On the other hand, the ability of
the Fund to participate in volume transactions may produce better execution for
the Fund in some cases. The Board believes that the benefits of the Advisers'
organization outweigh any limitations that may arise from simultaneous
transactions.
The Advisers, in effecting purchases and sales of portfolio securities for the
account of the Fund, implement the Fund's policy of seeking best execution of
orders. The Advisers may be permitted to pay higher brokerage commissions for
research services as described below. Consistent with this policy, orders for
portfolio transactions are placed with broker-dealer firms giving consideration
to the quality, quantity and nature of each firm's professional services which
include execution, clearance procedures, wire service quotations and statistical
and other research information provided to the Fund and the Advisers and their
affiliates. Any research benefits derived are available for all clients of the
29
<PAGE> 36
Advisers and their affiliates. Since statistical and other research information
is only supplementary to research efforts of the Advisers and still must be
analyzed and reviewed by its staff, the receipt of research information is not
expected to materially reduce its expenses. In selecting among firms believed to
meet the criteria for handling a particular transaction, the Advisers may give
consideration to those firms that have sold or are selling shares of other funds
managed by the Advisers and their affiliates or variable life insurance and
variable annuity contracts funded by the Fund, as well as to those firms that
provide market, statistical and other research information to the Fund and the
Advisers and their affiliates. The Advisers are not authorized to pay higher
commissions or in the case of principal trades, higher prices, to firms that
provide such services, except as described below. The Fund may purchase
instruments issued by banks that are receiving service payments or commissions;
however, no preferences will be given in making such portfolio purchases. Money
market instruments are normally purchased in principal transactions directly
from the issuer or from an underwriter or market maker. There are normally no
brokerage commissions paid for such purchases. Purchases from underwriters
include a commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers include the spread between the
bid and ask prices.
The Advisers may in certain instances be permitted to pay higher brokerage
commissions solely for receipt of market, statistical and other research
services as defined in Section 28(e) of the Securities Exchange Act of 1934 and
interpretations thereunder. Such services may include, among other things:
economic, industry or company research reports or investment recommendations;
computerized databases; quotation and execution equipment and software; and
research or analytical computer software and services. Where products or
services have a "mixed use," a good faith effort is made to make a reasonable
allocation of the cost of the products or services in accordance with the
anticipated research and non-research uses, and the cost attributable to
non-research use is paid by the Adviser or one of its affiliates in cash.
Subject to Section 28(e) of the Securities Exchange Act of 1934 and procedures
adopted by the Board of the Fund, the Fund could pay to a firm that provides
research services to the Advisers a commission for effecting a securities
transaction for the Fund in excess of the amount other firms would have charged
for the transaction. The Fund could do this if an Adviser determines in good
faith that the greater commission is reasonable in relation to the value of the
research services provided by the executing firm viewed in terms either of a
particular transaction or the Adviser's overall responsibilities to the Fund or
other clients. Not all such research services may be useful or of value in
advising the Fund. Research benefits will be available for all clients of the
Advisers and their affiliates. In addition, the investment
30
<PAGE> 37
management fee paid by the Fund to an Adviser is not reduced because the Adviser
receives these research services.
SKI. It is expected that SKI (including ZKI and ZKVA under SKI's ownership) will
implement portfolio transaction policies that are substantially similar to those
currently used by the Advisers, except that SKI does not intend to pay higher
brokerage commissions solely for receipt of market, statistical and other
research services as defined in Section 28(e) of the Securities Exchange Act of
1934 and interpretations thereunder, and, with respect to the practice of
selecting firms to handle a particular transaction based upon the sales of
Kemper Mutual Fund shares, SKI intends to only consider sales of shares of the
Fund in question. However, ZIML may continue its current portfolio transaction
policies as described above. In addition, to the maximum extent feasible, it is
expected that SKI will place orders for portfolio transactions through Scudder
Investor Services, Inc., Two International Place, Boston, Massachusetts 02110
("SIS") (a corporation registered as a broker/dealer and a subsidiary of
Scudder), which will in turn place orders on behalf of the Fund with issuers,
underwriters or other brokers and dealers. SIS will not receive any commission,
fee or other remuneration from the Fund for this service.
Set forth in Exhibit F are the total brokerage commissions paid by the Fund for
its most recently completed fiscal year, as well as the percentage of such
amounts that was allocated to broker-dealer firms on the basis of research
information.
SCUDDER. Scudder, Stevens & Clark, Inc. ("Scudder"), 345 Park Avenue, New York,
New York 10154, is one of America's oldest and largest investment management
firms. It manages approximately $125 billion in assets globally, about $50
billion of which are invested in equities and the balance in fixed income and
money market investments. Scudder manages approximately $45 billion in a variety
of open-end and closed-end funds for nearly two million shareholder accounts.
The firm also provides investment services for private and institutional
clients, such as trusts, endowments, and corporate employee benefit plans.
Scudder manages more than $22 billion internationally in both developed and
emerging markets. The firm is one of the world's largest managers of pension
fund assets invested overseas.
Scudder manages two families of pure no-load mutual funds. The Scudder Family of
Funds (approximately $23 billion) comprises 46 money market, bond and equity
mutual funds. The AARP Investment Program from Scudder, a family of 15 funds
(approximately $14 billion), is designed to address the needs of the more than
33 million members of the American Association of Retired Persons. The balance
of the funds under management (approximately $7 billion) comprises closed-end,
offshore, variable life insurance and other kinds of funds.
31
<PAGE> 38
The investment companies to which Scudder renders investment management
services, and the related fees, are identified in Exhibit F.
The names, addresses and principal occupations of the principal executive
officer and the directors of Scudder are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Daniel Pierce, Director Chairman of the Board and
Two International Place Managing Director, Scudder
Boston, Massachusetts 02110
Edmond D. Villani, Chief Executive President, Chief Executive
Officer and Director Officer and Managing Director,
345 Park Avenue Scudder
New York, New York 10154
Stephen R. Beckwith, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Lynn S. Birdsong, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Nicholas Bratt, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
E. Michael Brown, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Mark S. Casady, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Linda C. Coughlin, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
Margaret D. Hadzima, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Jerard K. Hartman, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Richard A. Holt, Director Managing Director, Scudder
Two Prudential Plaza
180 North Stetson, Suite 5400
Chicago, Illinois
</TABLE>
32
<PAGE> 39
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
John T. Packard, Director Managing Director, Scudder
101 California Street
San Francisco, California
Kathryn L. Quirk, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Cornelia M. Small, Director Managing Director, Scudder
345 Park Avenue
New York, New York 10154
Stephen A. Wohler, Director Managing Director, Scudder
Two International Place
Boston, Massachusetts 02110
</TABLE>
After consummation of the Transaction, it is anticipated that the principal
executive officer and directors of SKI will be as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Lynn Birdsong, Director Senior Executive Officer --
345 Park Avenue International Operations, SKI
New York, New York 10154
Lawrence Cheng, Director Member of Corporate Executive
Mythenquai 2 Board and Chief Investment
8002 Zurich, Switzerland Officer for Investments and
International Asset Management,
Zurich
Steven Gluckstern, Director Member of Corporate Executive
Mythenquai 2 Board and responsible for
8002 Zurich, Switzerland Reinsurance, Structured Finance,
Capital Market Products and
Strategic Investments, Zurich
Rolf Hueppi, Director Chairman and Chief Executive
Mythenquai 2 Officer, Zurich; Chairman of
8002 Zurich, Switzerland Board of Directors, SKI
Markus Rohrbasser, Director Chief Financial Officer and
Mythenquai 2 Member of Corporate Executive
8002 Zurich, Switzerland Board, Zurich
Cornelia Small, Director Senior Executive Officer --
345 Park Avenue Investment Management, SKI
New York, New York 10154
Edmond Villani, Chief Executive Chief Executive Officer, SKI
Officer and Director
345 Park Avenue
New York, New York 10154
</TABLE>
33
<PAGE> 40
MISCELLANEOUS
GENERAL
The cost of preparing, printing and mailing the enclosed proxy, accompanying
notice and proxy statement and all other costs in connection with solicitation
of proxies will be paid by ZKI, including any additional solicitation made by
letter, telephone or telegraph. In addition to solicitation by mail, certain
officers and representatives of the Funds, officers and employees of ZKI 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. In addition, ZKI has retained First Data Corp. to
solicit proxies on behalf of the Fund's Board and the boards of the other Kemper
Funds, the fee for which will be borne by ZKI. A COPY OF YOUR FUND'S ANNUAL
REPORT AND ANY MORE RECENT SEMI-ANNUAL REPORT ARE AVAILABLE WITHOUT CHARGE UPON
REQUEST BY WRITING TO THE FUND, 222 SOUTH RIVERSIDE PLAZA, CHICAGO, ILLINOIS
60606 OR BY CALLING 1-800-621-1048.
PROPOSALS OF SHAREHOLDERS
As a Massachusetts business trust, the Fund is not required to hold annual
shareholder meetings, but each will hold special meetings as required or deemed
desirable. Since the Fund does not hold regular meetings of shareholders, the
anticipated date of the next special shareholders meeting cannot be provided.
Any shareholder proposal that may properly be included in the proxy solicitation
material for a special shareholder meeting must be received by the Fund no later
than four months prior to the date when proxy statements are mailed to
shareholders.
OTHER MATTERS TO COME BEFORE THE MEETING
The Board is not aware of any matters that will be presented for action at the
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 Fund.
VOTING, QUORUM
Each share of the Fund is entitled to one vote on each matter submitted to a
vote of the shareholders at the Meeting; no shares have cumulative voting
rights.
Each valid proxy and contract owner voting instruction will be voted in
accordance with the instructions on the proxy and voting instruction and
34
<PAGE> 41
as the persons named in the proxy determine on such other business as may come
before the Meeting. If no designation is given, the proxy will be voted FOR the
election of the persons who have been nominated as trustees for the Fund and FOR
Items 2, 3, 4 (if applicable), 5 (if applicable) and 6. Interests of contract
owners for which no voting instructions are received will be voted in proportion
to the instructions that are timely received. Contract owners who execute voting
instructions may revoke them at any time before they are voted, by executing and
submitting a revised voting instruction form, by writing to the Fund, or by
revoking in person at the time of the Meeting. Only a shareholder may execute or
revoke a proxy. Therefore, a contract owner who has given voting instructions
may revoke them only through the Participating Insurance Companies. Voting
instructions given by telephone or electronically transmitted instruments may be
counted if obtained pursuant to procedures designed to verify that such
instructions have been authorized.
Item 1 (election of trustees) requires a plurality vote of the shares of the
Fund. This means that the eight nominees receiving the largest number of votes
will be elected. Item 2 (ratification of selection of independent auditors)
requires the affirmative vote of a majority of the shares voting on the matter.
Item 3 (approval of new investment management agreement), Item 4 (approval of
new sub-advisory agreement with ZIML), and Item 5 (approval of new sub-advisory
agreement with ZKVA) require the affirmative vote of a "majority of the
outstanding voting securities" of the applicable Series. The term "majority of
the outstanding voting securities" as defined in the 1940 Act means: the
affirmative vote of the lesser of (1) 67% of the voting securities of the Fund
present at the meeting if more than 50% of the outstanding shares of the Fund
are present in person or by proxy, or (2) more than 50% of the outstanding
shares of the Fund. Item 6 (approval of an amendment to the Fund's Agreement and
Declaration of Trust) requires the affirmative vote of more than 50% of the
share of the Fund.
On Items 1 and 2, the Fund will vote in the aggregate and not by series. On Item
3, each series of the Fund will vote separately. On Items 4 and 5, each affected
series of the Fund will vote separately. On Item 6, each series of the Fund will
vote separately.
The Declaration of Trust of the Fund provides that the presence at a shareholder
meeting in person or by proxy of at least 30% of the shares of the Fund
constitutes a quorum. Thus, the meeting for the Fund could not take place on its
scheduled date if less than 30% of the shares of the Fund were represented. If,
by the time scheduled for the meeting, a quorum of shareholders of a Fund is not
present or if a quorum is present but sufficient votes in favor of any of the
items are not received, the persons named as proxies may propose one or more
adjournments of the meeting with respect to the Fund to permit further
soliciting of proxies from
35
<PAGE> 42
shareholders of the Fund. Any such adjournment would require the affirmative
vote of a majority of the shares of the Fund present (in person or by proxy) at
the session of the meeting to be adjourned. The persons named as proxies will
vote in favor of any such adjournment if they determine that such adjournment
and additional solicitation are reasonable and in the interest of the respective
Fund's shareholders.
In tallying shareholder votes, abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (i) instructions have not been received
from the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular matter) will be
counted for purposes of determining whether a quorum is present for purposes of
convening the Meeting. On Item 1, abstentions and broker non-votes will have no
effect; the eight nominees receiving the largest number of votes will be
elected. On Item 2, abstentions and broker non-votes will not be counted as
"votes cast" and will have no effect on the result of the vote. On Items 3, 4, 5
and 6, abstentions and broker non-votes will be considered to be both present at
the Meeting and issued and outstanding and, as a result, will have the effect of
being counted as voted against the Items.
The Board of Trustees of the Fund recommends an affirmative vote on all items.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
Philip J. Collora
Secretary
36
<PAGE> 43
EXHIBIT INDEX
<TABLE>
<CAPTION>
<S> <C>
Shareholders........................................ Exhibit A
Form of Investment Management Agreement............. Exhibit B
Form of Sub-Advisory Agreement with Zurich
Investment Management Limited..................... Exhibit C
Form of Sub-Advisory Agreement with Zurich Kemper
Value Advisors, Inc............................... Exhibit D
Kemper Funds and Management Fees.................... Exhibit E
Scudder Funds and Fee Rates......................... Exhibit F
Fees and Expenses................................... Exhibit G
</TABLE>
37
<PAGE> 44
EXHIBIT A
SHAREHOLDERS
<TABLE>
<CAPTION>
NUMBER
NAME AND ADDRESS OF SHARES %
---------------- --------- -
<S> <C> <C>
</TABLE>
A-1
<PAGE> 45
EXHIBIT B
FORM OF
INVESTMENT MANAGEMENT AGREEMENT
[NAME OF TRUST]
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
, 199
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
[NAME OF SERIES]
Ladies and Gentlemen:
[Name of Trust] (the "Trust") has been established as a Massachusetts business
Trust to engage in the business of an investment company. Pursuant to the
Trust's Declaration of Trust, as amended from time-to-time (the "Declaration"),
the Board of Trustees is authorized to issue the Trust's shares of beneficial
interest, par value $ per share, (the "Shares") in separate series, or
funds. The Board of Trustees has authorized [name of series] (the "Fund").
Series may be abolished and dissolved, and additional series established, from
time to time by action of the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. DELIVERY OF DOCUMENTS. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objectives, policies and restrictions specified in the currently
effective Prospectus (the "Prospectus") and Statement of Additional Information
(the "SAI") relating to the Fund included in the Trust's Registration Statement
on Form N-1A, as amended from time to time, (the "Registration Statement") filed
by the Trust under the Investment Company Act of 1940, as amended, (the "1940
Act") and the Securities Act of 1933, as amended. Copies of the documents
referred to in the preceding sentence have been furnished to you by the Trust.
The Trust has also furnished you with copies properly certified or
B-1
<PAGE> 46
authenticated of each of the following additional documents related to the Trust
and the Fund:
(a) The Declaration dated , 19 , as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders of the Fund
selecting you as investment manager and approving the form of this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial Interest
dated , 19 relating to the Fund.
The Trust will furnish you from time to time with copies, properly certified or
authenticated, of all amendments of or supplements, if any, to the foregoing,
including the Prospectus, the SAI and the Registration Statement.
2. PORTFOLIO MANAGEMENT SERVICES. As manager of the assets of the Fund, you
shall provide continuing investment management of the assets of the Fund in
accordance with the investment objectives, policies and restrictions set forth
in the Prospectus and SAI; the applicable provisions of the 1940 Act and the
Internal Revenue Code of 1986, as amended, (the "Code") relating to regulated
investment companies and all rules and regulations thereunder; and all other
applicable federal and state laws and regulations of which you have knowledge;
subject always to policies and instructions adopted by the Trust's Board of
Trustees. In connection therewith, you shall use reasonable efforts to manage
the Fund so that it will qualify as a regulated investment company under
Subchapter M of the Code and regulations issued thereunder. The Fund shall have
the benefit of the investment analysis and research, the review of current
economic conditions and trends and the consideration of long-range investment
policy generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you shall
be entitled to receive and act upon advice of counsel to the Trust. You shall
also make available to the Trust promptly upon request all of the Fund's
investment records and ledgers as are necessary to assist the Trust in complying
with the requirements of the 1940 Act and other applicable laws. To the extent
required by law, you shall furnish to regulatory authorities having the
requisite authority any information or reports in connection with the services
provided pursuant to this Agreement which may be requested in order to ascertain
whether the operations of the Trust are being conducted in a manner consistent
with applicable laws and regulations.
You shall determine the securities, instruments, investments, currencies,
repurchase agreements, futures, options and other contracts relating to
B-2
<PAGE> 47
investments to be purchased, sold or entered into by the Fund and place orders
with broker-dealers, foreign currency dealers, futures commission merchants or
others pursuant to your determinations and all in accordance with Fund policies
as expressed in the Registration Statement. You shall determine what portion of
the Fund's portfolio shall be invested in securities and other assets and what
portion, if any, should be held uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on the
investment performance of the Fund and on the performance of your obligations
pursuant to this Agreement, and you shall supply such additional reports and
information as the Trust's officers or Board of Trustees shall reasonably
request.
3. ADMINISTRATIVE SERVICES. In addition to the portfolio management services
specified above in section 2, you shall furnish at your expense for the use of
the Fund such office space and facilities in the United States as the Fund may
require for its reasonable needs, and you (or one or more of your affiliates
designated by you) shall render to the Trust administrative services on behalf
of the Fund necessary for operating as an open end investment company and not
provided by persons not parties to this Agreement including, but not limited to,
preparing reports to and meeting materials for the Trust's Board of Trustees and
reports and notices to Fund shareholders; supervising, negotiating contractual
arrangements with, to the extent appropriate, and monitoring the performance of,
accounting agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers, insurers
and other persons in any capacity deemed to be necessary or desirable to Fund
operations; preparing and making filings with the Securities and Exchange
Commission (the "SEC") and other regulatory and self-regulatory organizations,
including, but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by the Fund's transfer agent; assisting in the preparation
and filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under applicable
federal and state securities laws; maintaining or causing to be maintained for
the Fund all books, records and reports and any other information required under
the 1940 Act, to the extent that such books, records and reports and other
information are not maintained by the Fund's custodian or other agents of the
Fund; assisting in establishing the accounting policies of the Fund; assisting
in the resolution of accounting issues that
B-3
<PAGE> 48
may arise with respect to the Fund's operations and consulting with the Fund's
independent accountants, legal counsel and the Fund's other agents as necessary
in connection therewith; establishing and monitoring the Fund's operating
expense budgets; reviewing the Fund's bills; processing the payment of bills
that have been approved by an authorized person; assisting the Fund in
determining the amount of dividends and distributions available to be paid by
the Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting the Trust as it may reasonably request in the conduct of
the Fund's business, subject to the direction and control of the Trust's Board
of Trustees. Nothing in this Agreement shall be deemed to shift to you or to
diminish the obligations of any agent of the Fund or any other person not a
party to this Agreement which is obligated to provide services to the Fund.
4. ALLOCATION OF CHARGES AND EXPENSES. Except as otherwise specifically provided
in this section 4, you shall pay the compensation and expenses of all Trustees,
officers and executive employees of the Trust (including the Fund's share of
payroll taxes) who are affiliated persons of you, and you shall make available,
without expense to the Fund, the services of such of your directors, officers
and employees as may duly be elected officers of the Trust, subject to their
individual consent to serve and to any limitations imposed by law. You shall
provide at your expense the portfolio management services described in section 2
hereof and the administrative services described in section 3 hereof.
You shall not be required to pay any expenses of the Fund other than those
specifically allocated to you in this section 4. In particular, but without
limiting the generality of the foregoing, you shall not be responsible, except
to the extent of the reasonable compensation of such of the Fund's Trustees and
officers as are directors, officers or employees of you whose services may be
involved, for the following expenses of the Fund: organization expenses of the
Fund (including out of-pocket expenses, but not including your overhead or
employee costs); fees payable to you and to any other Fund advisors or
consultants; legal expenses; auditing and accounting expenses; maintenance of
books and records which are required to be maintained by the Fund's custodian or
other agents of the Trust; telephone, telex, facsimile, postage and other
communications expenses; taxes and governmental fees; fees, dues and expenses
incurred by the Fund in connection with membership in investment company trade
organizations; fees and expenses of the Fund's accounting agent for which the
Trust is responsible pursuant to the terms of the Fund Accounting Services
Agreement, custodians, subcustodians, transfer agents, dividend
B-4
<PAGE> 49
disbursing agents and registrars; payment for portfolio pricing or valuation
services to pricing agents, accountants, bankers and other specialists, if any;
expenses of preparing share certificates and, except as provided below in this
section 4, other expenses in connection with the issuance, offering,
distribution, sale, redemption or repurchase of securities issued by the Fund;
expenses relating to investor and public relations; expenses and fees of
registering or qualifying Shares of the Fund for sale; interest charges, bond
premiums and other insurance expense; freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; the
compensation and all expenses (specifically including travel expenses relating
to Trust business) of Trustees, officers and employees of the Trust who are not
affiliated persons of you; brokerage commissions or other costs of acquiring or
disposing of any portfolio securities of the Fund; expenses of printing and
distributing reports, notices and dividends to shareholders; expenses of
printing and mailing Prospectuses and SAIs of the Fund and supplements thereto;
costs of stationery; any litigation expenses; indemnification of Trustees and
officers of the Trust; and costs of shareholders' and other meetings.
You shall not be required to pay expenses of any activity which is primarily
intended to result in sales of Shares of the Fund if and to the extent that (i)
such expenses are required to be borne by a principal underwriter which acts as
the distributor of the Fund's Shares pursuant to an underwriting agreement which
provides that the underwriter shall assume some or all of such expenses, or (ii)
the Trust on behalf of the Fund shall have adopted a plan in conformity with
Rule 12b-1 under the 1940 Act providing that the Fund (or some other party)
shall assume some or all of such expenses. You shall be required to pay such of
the foregoing sales expenses as are not required to be paid by the principal
underwriter pursuant to the underwriting agreement or are not permitted to be
paid by the Fund (or some other party) pursuant to such a plan.
5. MANAGEMENT FEE. For all services to be rendered, payments to be made and
costs to be assumed by you as provided in sections 2, 3, and 4 hereof, the Trust
on behalf of the Fund shall pay you in United States Dollars on the last day of
each month the unpaid balance of a fee equal to the excess of (a) 1/12 of
of 1 percent of the average daily net assets as defined below of the Fund for
such month; [provided that, for any calendar month during which the average of
such values exceeds $ , the fee payable for that month based on the portion
of the average of such values in excess of $ shall be 1/12 of of 1
percent of such portion;] [and provided that, for any calendar month during
which the average of such values exceeds $ , the fee payable for that month
based on the portion of the average of such values in excess of $ shall be
1/12 of of 1 percent of such portion;] [SEE PAGE OF PROXY STATEMENT FOR
EACH FUND'S MANAGEMENT FEE] over (b) any
B-5
<PAGE> 50
compensation waived by you from time to time (as more fully described below).
You shall be entitled to receive during any month such interim payments of your
fee hereunder as you shall request, provided that no such payment shall exceed
75 percent of the amount of your fee then accrued on the books of the Fund and
unpaid.
The "average daily net assets" of the Fund shall mean the average of the values
placed on the Fund's net assets as of 4:00 p.m. (New York time) on each day on
which the net asset value of the Fund is determined consistent with the
provisions of Rule 22c-1 under the 1940 Act or, if the Fund lawfully determines
the value of its net assets as of some other time on each business day, as of
such time. The value of the net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Declaration and the Registration
Statement. If the determination of net asset value does not take place for any
particular day, then for the purposes of this section 5, the value of the net
assets of the Fund as last determined shall be deemed to be the value of its net
assets as of 4:00 p.m. (New York time), or as of such other time as the value of
the net assets of the Fund's portfolio may be lawfully determined on that day.
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 5.
You may waive all or a portion of your fees provided for hereunder and such
waiver shall be treated as a reduction in purchase price of your services. You
shall be contractually bound hereunder by the terms of any publicly announced
waiver of your fee, or any limitation of the Fund's expenses, as if such waiver
or limitation were fully set forth herein.
6. AVOIDANCE OF INCONSISTENT POSITION; SERVICES NOT EXCLUSIVE. In connection
with purchases or sales of portfolio securities and other investments for the
account of the Fund, neither you nor any of your directors, officers or
employees shall act as a principal or agent or receive any commission. You or
your agent shall arrange for the placing of all orders for the purchase and sale
of portfolio securities and other investments for the Fund's account with
brokers or dealers selected by you in accordance with Fund policies as expressed
in the Registration Statement. If any occasion should arise in which you give
any advice to clients of yours concerning the Shares of the Fund, you shall act
solely as investment counsel for such clients and not in any way on behalf of
the Fund.
Your services to the Fund pursuant to this Agreement are not to be deemed to be
exclusive and it is understood that you may render investment advice, management
and services to others. In acting under this Agreement, you shall be an
independent contractor and not an agent of the Trust. Whenever the Fund and one
or more other accounts or
B-6
<PAGE> 51
investment companies advised by you have available funds for investment,
investments suitable and appropriate for each shall be allocated in accordance
with procedures believed by you to be equitable to each entity. Similarly,
opportunities to sell securities shall be allocated in a manner believed by you
to be equitable. The Fund recognizes that in some cases this procedure may
adversely affect the size of the position that may be acquired or disposed of
for the Fund.
7. LIMITATION OF LIABILITY OF MANAGER. As an inducement to your undertaking to
render services pursuant to this Agreement, the Trust agrees that you shall not
be liable under this Agreement for any error of judgment or mistake of law or
for any loss suffered by the Fund in connection with the matters to which this
Agreement relates, provided that nothing in this Agreement shall be deemed to
protect or purport to protect you against any liability to the Trust, the Fund
or its shareholders to which you would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence in the performance of your duties, or
by reason of your reckless disregard of your obligations and duties hereunder.
8. DURATION AND TERMINATION OF THIS AGREEMENT. This Agreement shall remain in
force until , 19 , and continue in force from year to year thereafter,
but only so long as such continuance is specifically approved at least annually
(a) by the vote of a majority of the Trustees who are not parties to this
Agreement or interested persons of any party to this Agreement, cast in person
at a meeting called for the purpose of voting on such approval, and (b) by the
Trustees of the Trust, or by the vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and the rules and regulations thereunder and
any applicable SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time, without
the payment of any penalty, by the vote of a majority of the outstanding voting
securities of the Fund or by the Trust's Board of Trustees on 60 days' written
notice to you, or by you on 60 days' written notice to the Trust. This Agreement
shall terminate automatically in the event of its assignment.
This Agreement may be terminated with respect to the Fund at any time without
the payment of any penalty by the Board of Trustees or by vote of a majority of
the outstanding voting securities of the Fund in the event that it shall have
been established by a court of competent jurisdiction that you or any of your
officers or directors has taken any action which results in a breach of your
covenants set forth herein.
9. AMENDMENT OF THIS AGREEMENT. No provision of this Agreement may be changed,
waived, discharged or terminated orally, but only by an
B-7
<PAGE> 52
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought, and no amendment of this
Agreement shall be effective until approved in a manner consistent with the 1940
Act and rules and regulations thereunder and any applicable SEC exemptive order
therefrom.
10. LIMITATION OF LIABILITY FOR CLAIMS. The Declaration, a copy of which,
together with all amendments thereto, is on file in the Office of the Secretary
of the Commonwealth of Massachusetts, provides that the name "[Name of Trust]"
refers to the Trustees under the Declaration collectively as Trustees and not as
individuals or personally, and that no shareholder of the Fund, or Trustee,
officer, employee or agent of the Trust, shall be subject to claims against or
obligations of the Trust or of the Fund to any extent whatsoever, but that the
Trust estate only shall be liable.
You are hereby expressly put on notice of the limitation of liability as set
forth in the Declaration and you agree that the obligations assumed by the Trust
on behalf of the Fund pursuant to this Agreement shall be limited in all cases
to the Fund and its assets, and you shall not seek satisfaction of any such
obligation from the shareholders or any shareholder of the Fund or any other
series of the Trust, or from any Trustee, officer, employee or agent of the
Trust. You understand that the rights and obligations of each Fund, or series,
under the Declaration are separate and distinct from those of any and all other
series.
11. MISCELLANEOUS. The captions in this Agreement are included for convenience
of reference only and in no way define or limit any of the provisions hereof or
otherwise affect their construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
In interpreting the provisions of this Agreement, the definitions contained in
Section 2(a) of the 1940 Act (particularly the definitions of "affiliated
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the SEC by any rule, regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be construed
in a manner inconsistent with the 1940 Act, or in a manner which would cause the
Fund to fail to comply with the requirements of Subchapter M of the Code.
B-8
<PAGE> 53
This Agreement shall supersede all prior investment advisory or management
agreements entered into between you and the Trust on behalf of the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
counterpart to the Trust, whereupon this letter shall become a binding contract
effective as of the date of this Agreement.
Yours very truly,
[Name of Trust], on behalf of
Fund
By:
-----------------------------------
President
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
-----------------------------------
President
B-9
<PAGE> 54
EXHIBIT C
FORM OF SUB-ADVISORY AGREEMENT
WITH ZURICH INVESTMENT MANAGEMENT LIMITED
AGREEMENT made this day of , 199 , by and between SCUDDER KEMPER
INVESTMENTS, INC., a Delaware corporation (the "Adviser") and ZURICH INVESTMENT
MANAGEMENT LIMITED, an English corporation (the "Sub-Adviser").
WHEREAS, [Name of Fund], a Massachusetts business trust (the "Fund") is a
management investment company registered under the Investment Company Act of
1940;
WHEREAS, the Fund is authorized to issue Shares in separate series with each
representing the interests in a separate portfolio of securities and other
assets;
WHEREAS, the Fund has retained the Adviser to render to it investment advisory
and management services with regard to the series of the Fund known as the
International Portfolio (the "initial series") pursuant to an Investment
Management Agreement (the "Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the Sub-Adviser to render
investment advisory and management services with respect to that portion of the
portfolio of the Fund's initial series allocated to the Sub-Adviser by the
Adviser for management, including services related to foreign securities,
foreign currency transactions and related investments, and the Sub-Adviser is
willing to render such services;
NOW THEREFORE, in consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:
1. The Adviser hereby employs the Sub-Adviser to manage the investment and
reinvestment of the assets of the initial series of the Fund allocated by the
Adviser in its sole discretion to the Sub-Adviser for management, including
services related to foreign securities, foreign currency transactions and
related investments, in accordance with the applicable investment objectives,
policies and limitations and subject to the supervision of the Adviser and the
Board of Trustees of the Fund for the period and upon the terms herein set
forth, and to place orders for the purchase or sale of portfolio securities for
the Fund's account with brokers or dealers selected by the Sub-Adviser; and, in
connection therewith, the Sub-Adviser is authorized as the agent of the Fund to
give instructions to the Custodian of the Fund as to the deliveries of
securities and payments of cash for the account of the Fund. In connection with
the
C-1
<PAGE> 55
selection of such brokers or dealers and the placing of such orders, the
Sub-Adviser is directed to seek for the Fund best execution of orders. Subject
to such policies as the Board of Trustees of the Fund determines and subject to
satisfying the requirements of Section 28(e) of the Securities Exchange Act of
1934, the Sub-Adviser shall not be deemed to have acted unlawfully or to have
breached any duty, created by this Agreement or otherwise, solely by reason of
its having caused the Fund to pay a broker or dealer an amount of commission for
effecting a securities transaction in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction, if the Sub-
Adviser determined in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research services provided by such
broker or dealer viewed in terms of either that particular transaction or the
Sub-Adviser's overall responsibilities with respect to the clients of the
Sub-Adviser as to which the Sub-Adviser exercises investment discretion. The
Adviser recognizes that all research services and research that the Sub-Adviser
receives are available for all clients of the Sub-Adviser, and that the Fund and
other clients of the Sub-Adviser may benefit thereby. The investment of funds
shall be subject to all applicable restrictions of the Agreement and Declaration
of Trust and By-Laws of the Fund as may from time to time be in force.
The Sub-Adviser accepts such employment and agrees during such period to render
such investment management services, to furnish related office facilities and
equipment and clerical, bookkeeping and administrative services for the Fund, to
permit any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions and to assume the
obligations herein set forth for the compensation herein provided. The
Sub-Adviser shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund or the Adviser in any
way or otherwise be deemed an agent of the Fund or the Adviser. It is understood
and agreed that the Sub-Adviser, by separate agreements with the Fund, may also
serve the Fund in other capacities.
The Sub-Adviser will keep the Fund and the Adviser informed of developments
materially affecting the Fund and shall, on the Sub-Adviser's own initiative and
as reasonably requested by the Adviser or the Fund, furnish to the Fund and the
Adviser from time to time whatever information the Adviser reasonably believes
appropriate for this purpose.
The Sub-Adviser agrees that, in the performance of the duties required of it by
this Agreement, it will comply with the Investment Advisers Act of 1940 and the
Investment Company Act of 1940, and all rules and regulations thereunder, and
all applicable laws and regulations and with any applicable procedures adopted
by the Fund's Board of Trustees and
C-2
<PAGE> 56
identified in writing to the Sub-Adviser.
The Sub-Adviser shall provide the Adviser with such investment portfolio
accounting and shall maintain and provide such detailed records and reports as
the Adviser may from time to time reasonably request, including without
limitation, daily processing of investment transactions and cash positions,
periodic valuations of investment portfolio positions as required by the
Adviser, monthly reports of the investment portfolio and all investment
transactions and the preparation of such reports and compilation of such data as
may be required by the Adviser to comply with the obligations imposed upon it
under Management Agreement.
The Sub-Adviser shall provide adequate security with respect to all materials,
records, documents and data relating to any of its responsibilities pursuant to
this Agreement including any means for the effecting of securities transactions.
The Sub-Adviser agrees that it will make available to the Adviser and the Fund
promptly upon their request copies of all of its investment records and ledgers
with respect to the Fund to assist the Adviser and the Fund in monitoring
compliance with the Investment Company Act of 1940 and the Investment Advisers
Act of 1940, as well as other applicable laws. The Sub-Adviser will furnish the
Fund's Board of Trustees such periodic and special reports with respect to the
Fund's portfolio as the Adviser or the Board of Trustees may reasonably request.
In compliance with the requirements of Rule 31a-3 under the Investment Company
Act of 1940, the Sub-Adviser hereby agrees that any records that it maintains
for the Fund are the property of the Fund and further agrees to surrender
promptly to the Fund copies of any such records upon the Fund's request. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the Investment Company Act of 1940 any records with respect to the
Sub-Adviser's duties hereunder required to be maintained by Rule 31a-1 under
such Act to the extent that the Sub-Adviser prepares and maintains such records
pursuant to this Agreement and to preserve the records required by Rule 204-2
under the Investment Advisers Act of 1940 for the period specified in that Rule.
The Sub-Adviser agrees that it will immediately notify the Adviser and the Fund
in the event that the Sub-Adviser: (i) becomes subject to a statutory
disqualification that prevents the Sub-Adviser from serving as an investment
adviser pursuant to this Agreement; or (ii) is or expects to become the subject
of an administrative proceeding or enforcement action by the United States
Securities and Exchange Commission, the Investment Management Regulatory
Organization ("IMRO") or other regulatory authority.
The Sub-Adviser represents that it is an investment adviser registered
C-3
<PAGE> 57
under the Investment Advisers Act of 1940 and other applicable laws and it is
regulated by IMRO and will treat the Fund as a Non-Private Customer as defined
by IMRO. The Sub-Adviser agrees to maintain the completeness and accuracy of its
registration on Form ADV in accordance with all legal requirements relating to
that Form. The Sub-Adviser acknowledges that it is an "investment adviser" to
the Fund within the meaning of the Investment Company Act of 1940 and the
Investment Advisers Act of 1940.
The Sub-Adviser shall be responsible for maintaining an appropriate compliance
program to ensure that the services provided by it under this Agreement are
performed in a manner consistent with applicable laws and the terms of this
Agreement. Furthermore, the Sub-Adviser shall maintain and enforce a Code of
Ethics that is in form and substance satisfactory to the Adviser. Sub-Adviser
agrees to provide such reports and certifications regarding its compliance
program as the Adviser or the Fund shall reasonably request from time to time.
2. In the event that there are, from time to time, one or more additional series
of the Fund with respect to which the Adviser desires to retain the Sub-Adviser
to render investment advisory and management services hereunder, the Adviser
shall notify the Sub-Adviser in writing. If the Sub-Adviser is willing to render
such services, it shall notify the Adviser in writing whereupon such additional
series shall become subject to this Agreement.
3. For the services and facilities described in Section 1, the Adviser will pay
to the Sub-Adviser, at the end of each calendar month, a sub-advisory fee
computed at an annual rate of [SEE PAGES 12 AND 13 OF THE PROXY STATEMENT FOR
EACH FUND'S SUB-ADVISORY FEE] of that portion of the average daily net assets of
the initial series of the Fund that is allocated by the Adviser to the
Sub-Adviser for management.
For the month and year in which this Agreement becomes effective or terminates,
there shall be an appropriate proration on the basis of the number of days that
the Agreement is in effect during the month and year, respectively.
4. The services of the Sub-Adviser under this Agreement are not to be deemed
exclusive, and the Sub-Adviser shall be free to render similar services or other
services to others so long as its services hereunder are not impaired thereby.
5. The Sub-Adviser shall arrange, if desired by the Fund, for officers or
employees of the Sub-Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by law.
C-4
<PAGE> 58
6. The net asset value for each series of the Fund subject to this Agreement
shall be calculated as the Board of Trustees of the Fund may determine from time
to time in accordance with the provisions of the Investment Company Act of 1940.
On each day when net asset value is not calculated, the net asset value of a
series shall be deemed to be the net asset value of such series as of the close
of business on the last day on which such calculation was made for the purpose
of the foregoing computations.
7. Subject to applicable statutes and regulations, it is understood that certain
trustees, officers or agents of the Fund are or may be interested in the
Sub-Adviser as officers, directors, agents, shareholders or otherwise, and that
the officers, directors, shareholders and agents of the Sub-Adviser may be
interested in the Fund otherwise than as a trustee, officer or agent.
8. The Sub-Adviser shall not be liable for any error of judgment or of law or
for any loss suffered by the Fund or the Adviser in connection with the matters
to which this Agreement relates, except loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Sub-Adviser in the performance
of its obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
9. This Agreement shall become effective with respect to the initial series of
the Fund on the date hereof and shall remain in full force until
, 199 , unless sooner terminated as hereinafter provided.
This Agreement shall continue in force from year to year thereafter with respect
to each such series, but only as long as such continuance is specifically
approved for each series at least annually in the manner required by the
Investment Company Act of 1940 and the rules and regulations thereunder;
provided, however, that if the continuation of this Agreement is not approved
for a series, the Sub-Adviser may continue to serve in such capacity for such
series in the manner and to the extent permitted by the Investment Company Act
of 1940 and the rules and regulations thereunder.
This Agreement shall automatically terminate in the event of its assignment or
in the event of the termination of the Management Agreement and may be
terminated at any time with respect to any series subject to this Agreement
without the payment of any penalty by the Adviser or by the Sub-Adviser on sixty
(60) days written notice to the other party. The Fund may effect termination
with respect to any such series without payment of any penalty by action of the
Board of Trustees or by vote of a majority of the outstanding voting securities
of such series on sixty (60) days written notice to the Adviser and the
Sub-Adviser.
This Agreement may be terminated with respect to any series at any time without
the payment of any penalty by the Board of Trustees of the Fund, by vote of a
majority of the outstanding voting securities of such series or
C-5
<PAGE> 59
by the Adviser in the event that it shall have been established by a court of
competent jurisdiction that the Sub-Adviser or any officer or director of the
Sub-Adviser has taken any action which results in a breach of the covenants of
the Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Sub-Adviser to
receive payments on any unpaid balance of the compensation described in Section
3 earned prior to such termination.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepaid, to the other party at such address as such other
party may designate for the receipt of such notice.
12. This Agreement shall be construed in accordance with applicable federal law
and the laws of the Commonwealth of Massachusetts.
13. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this Agreement
to be executed as of the day and year first above written.
SCUDDER KEMPER INVESTMENTS, INC.
By: _________________________
Title: ______________________
ZURICH INVESTMENT MANAGEMENT LIMITED
By: _________________________
Title: ______________________
C-6
<PAGE> 60
EXHIBIT D
FORM OF SUB-ADVISORY AGREEMENT
WITH ZURICH KEMPER VALUE ADVISORS, INC.
AGREEMENT made this day of , 199 , by and between
SCUDDER KEMPER INVESTMENTS, INC., a Delaware corporation (the "Adviser") and
ZURICH KEMPER VALUE ADVISORS, INC., a Delaware corporation (the "Sub-Adviser").
WHEREAS, INVESTORS FUND SERIES, a Massachusetts business trust (the "Fund") is
an open-end management investment company registered under the Investment
Company Act of 1940, the shares of beneficial interest ("Shares") of each series
of which are registered under the Securities Act of 1933;
WHEREAS, the Fund has retained the Adviser to render to it investment advisory
and management services pursuant to an Investment Management Agreement, dated
, 199 and amended to include additional series on
, 199 (the "Management Agreement"); and
WHEREAS, the Adviser desires at this time to retain the Sub-Adviser to render
investment advisory and management services with respect to that portion of the
portfolio of four series of the Fund allocated to the Sub-Adviser by the Adviser
for management and the Sub-Adviser is willing to render such services, such
series being the Value and Growth Portfolio, the Horizon 20+ Portfolio, the
Horizon 10+ Portfolio, and the Horizon 5 Portfolio (collectively, the "initial
series");
NOW THEREFORE, in consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:
1. The Adviser hereby employs the Sub-Adviser to manage the investment and
reinvestment of the assets of the Fund allocated by the Adviser in its sole
discretion to the Sub-Adviser for management in accordance with the applicable
investment objectives and policies and limitations and subject to the
supervision of the Adviser and the Board of Trustees of the Fund for the period
and upon the terms herein set forth, and to place orders for the purchase or
sale of portfolio securities for the Fund's account with brokers or dealers
selected by the Sub-Adviser, and, in connection therewith, the Sub-Adviser is
authorized as the agent of the Fund to give instructions to the Custodian of the
Fund as to the deliveries of securities and payments of cash for the account of
the Fund. In connection with the selection of such brokers or dealers and the
placing of such orders, the Sub-Adviser is directed to seek for the Fund best
execution of orders. Subject to such policies as the Board of Trustees of
D-1
<PAGE> 61
the Fund determines, the Sub-Adviser shall not be deemed to have acted
unlawfully or to have breached any duty, created by this Agreement or otherwise,
solely by reason of its having caused the Fund to pay a broker or dealer an
amount of commission for effecting a securities transaction in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction, if the Sub-Adviser determined in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer viewed in terms of either
that particular transaction or the Sub-Adviser's overall responsibilities with
respect to the clients of the Sub-Adviser as to which the Sub-Adviser exercises
investment discretion. The Adviser recognizes that all research services and
research that the Sub-Adviser receives or generates are available for all
clients of the Sub-Adviser, and that the Fund and other clients of the
Sub-Adviser may benefit thereby. The investment of funds shall be subject to all
applicable restrictions of the Agreement and Declaration of Trust and By-Laws of
the Fund as may from time to time be in force.
The Sub-Adviser accepts such employment and agrees during such period to render
such investment management services, to furnish related office facilities and
equipment and clerical, bookkeeping and administrative services for the Fund, to
permit any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions and to assume the
obligations herein set forth for the compensation herein provided. The
Sub-Adviser shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund or the Adviser in any
way or otherwise be deemed an agent of the Fund or the Adviser. It is understood
and agreed that the Sub-Adviser, by separate agreements with the Fund, may also
serve the Fund in other capacities.
2. In the event that there are, from time to time, one or more additional series
of the Fund with respect to which the Adviser desires to retain the Sub-Adviser
to render investment advisory and management services hereunder, the Adviser
shall notify the Sub-Adviser in writing. If the Sub-Adviser is willing to render
such services, it shall notify the Adviser in writing whereupon such series
shall become subject to this agreement.
3. For the services and facilities described in Section 1, the Adviser will pay
to the Sub-Adviser at the end of each calendar month, a sub-advisory fee
computed at an annual rate of .25 of 1% of the portion of the average daily net
assets of each initial series allocated by the Adviser to the Sub-Adviser for
management.
The fee as computed above shall be computed separately for, and charged as an
expense of, each series of the Fund based upon the average daily net
D-2
<PAGE> 62
assets of such series. For the month and year in which this Agreement becomes
effective or terminates, there shall be an appropriate proration on the basis of
the number of days that the Agreement is in effect during the month and year,
respectively.
4. The services of the Sub-Adviser under this Agreement are not to be deemed
exclusive, and the Sub-Adviser shall be free to render similar services or other
services to others so long as its services hereunder are not impaired thereby.
5. The Sub-Adviser shall arrange, if desired by the Fund, for officers or
employees of the Sub-Adviser to serve, without compensation from the Fund, as
trustees, officers or agents of the Fund if duly elected or appointed to such
positions and subject to their individual consent and to any limitations imposed
by law.
6. The net asset value for each series of the Fund shall be calculated in
accordance with the provisions of the Fund's prospectus or as the trustees may
determine in accordance with the provisions of the Investment Company Act of
1940. On each day when net asset value is not calculated, the net asset value of
a series shall be deemed to be the net asset value of such series as of the
close of business on the last day on which such calculation was made for the
purpose of the foregoing computations.
7. Subject to applicable statutes and regulations, it is understood that certain
trustees, officers or agents of the Fund are or may be interested in the
Sub-Adviser as officers, directors, agents, shareholders or otherwise, and that
the officers, directors, shareholders and agents of the Sub-Adviser may be
interested in the Fund otherwise than as a trustee, officer or agent.
8. The Sub-Adviser shall not be liable for any error of judgment or of law or
for any loss suffered by the Fund or the Adviser in connection with the matters
to which this Agreement relates, except loss resulting from willful misfeasance,
bad faith or gross negligence on the part of the Sub-Adviser in the performance
of its obligations and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
9. This Agreement shall become effective with respect to the initial series of
the Fund on the date hereof and shall remain in full force until
, 199 , unless sooner terminated as hereinafter provided.
This Agreement shall continue in force from year to year thereafter with respect
to each series, but only as long as such continuance is specifically approved
for each series at least annually in the manner required by the Investment
Company Act of 1940 and the rules and regulations thereunder; provided, however,
that if the continuation of this Agreement is not approved for a series, the
Sub-Adviser may continue to serve in such capacity for such Portfolio in the
manner and to the extent
D-3
<PAGE> 63
permitted by the Investment Company Act of 1940 and the rules and regulations
thereunder.
This Agreement shall automatically terminate in the event of its assignment or
in the event of the termination of the Management Agreement and may be
terminated at any time with respect to any series without the payment of any
penalty by the Adviser or by the Sub-Adviser on sixty (60) days written notice
to the other party. The Fund may effect termination with respect to any series
without payment of any penalty by action of the Board of Trustees or by vote of
a majority of the outstanding voting securities of such series on sixty (60)
days written notice to the Adviser and the Sub-Adviser.
This Agreement may be terminated with respect to any series at any time without
the payment of any penalty by the Board of Trustees of the Fund, by vote of a
majority of the outstanding voting securities of such series or by the Adviser
in the event that it shall have been established by a court of competent
jurisdiction that the Sub-Adviser or any officer or director of the Sub-Adviser
has taken any action which results in a breach of the covenants of the
Sub-Adviser set forth herein.
The terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meanings set forth in the Investment Company Act of
1940 and the rules and regulations thereunder.
Termination of this Agreement shall not affect the right of the Sub-Adviser to
receive payments on any unpaid balance of the compensation described in Section
3 earned prior to such termination.
10. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder shall not be thereby
affected.
11. Any notice under this Agreement shall be in writing, addressed and delivered
or mailed, postage prepared, to the other party at such address as such other
party may designate for the receipt of such notice.
12. This Agreement shall be construed in accordance with applicable federal law
and the laws of the Commonwealth of Massachusetts.
13. This Agreement is the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements between the parties
relating to the subject matter hereof.
D-4
<PAGE> 64
IN WITNESS WHEREOF, the Adviser and the Sub-Adviser have caused this Agreement
to be executed as of the day and year first above written.
SCUDDER KEMPER
INVESTMENTS, INC.
By:
------------------------------------
Title:
---------------------------------
ATTEST:
- ---------------------------------------
Title:
- ---------------------------------------
ZURICH KEMPER VALUE
ADVISORS, INC.
By:
------------------------------------
Title:
---------------------------------
ATTEST:
- ---------------------------------------
Title:
- ---------------------------------------
D-5
<PAGE> 65
EXHIBIT E
KEMPER FUNDS AND MANAGEMENT FEES
E-1
<PAGE> 66
EXHIBIT F
SCUDDER FUNDS AND FEE RATES
F-1
<PAGE> 67
EXHIBIT G
FEES AND EXPENSES
<TABLE>
<CAPTION>
ITEM KMMP KTRP KHYP KGP KGSP KIP KSCGP KIGBP KVP KSCVP
---- ---- ---- ---- --- ---- --- ----- ----- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year End......... 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
Management Fees Paid to
ZKI or ZKVA............
Effective Management Fee
Rate...................
Brokerage Commissions
Paid by Fund...........
Percent of Brokerage
Commissions Paid by
Fund Allocated on Basis
of Research............
<CAPTION>
ITEM KVGP KH20P KH10P KH5P KBCP KGIP
---- ---- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year End......... 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
Management Fees Paid to
ZKI or ZKVA............
Effective Management Fee
Rate...................
Brokerage Commissions
Paid by Fund...........
Percent of Brokerage
Commissions Paid by
Fund Allocated on Basis
of Research............
</TABLE>
- ---------------
(a) ZKI waived its management fee and absorbed certain operating expenses for
.
G-1
<PAGE> 68
[KEMPER FUNDS LOGO]
PROXY SERVICES
P.O. BOX 9148
FARMINGDALE, NY 11735
INVESTORS FUND SERIES
FOR THE SPECIAL MEETING OF SHAREHOLDERS
DECEMBER 3, 1997
The signers of this proxy hereby appoint
Arthur R. Gottschalk and Stephen B. Timbers and
each of them, attorneys and proxies, with power
of substitution in each, to vote all shares for
the signers at the Joint Special Meeting of
Shareholders to be held December 3, 1997, and at
any adjournments thereof, as specified herein,
and in accordance with their best judgment, on
any other business that may properly come before
this meeting. If no specification is made
herein, all shares will be voted "FOR" the
proposals set forth on this proxy.
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: [X]
- --------------------------------------------------------------------------------
INVESTORS FUND SERIES
PLEASE VOTE PROMPTLY!
Your vote is needed! Please vote below and sign in the space provided.
THE PROXY IS SOLICITED BY THE BOARD OF THE FUND WHICH RECOMMENDS A VOTE "FOR"
ALL ITEMS.
<TABLE>
<S><C>
1. To elect the following as trustees For Withhold For All
All All Except
/ / / / / /
01) James B. Akins, 02) Arthur R. Gottschalk, 03) Frederick T. Kelsey,
04) Daniel Pierce, 05) Fred B. Renwick, 06) John B. Tingleff, 07) Edmond D. Villani,
08) John G. Weithers
-----------------------------------------------------------------------------------------
To withhold authority to vote on any individual nominee(s), please print the number(s)
on the line above.
2. To ratify the selection of Ernst & Young LLP
as independent auditors for the For Against Abstain
current fiscal year. / / / / / /
3. To approve a new investment management
agreement with Scudder Kemper Investments,
Inc. ("SKI") (or with Zurich Kemper
Investments, Inc. transferable to SKI or
with Zurich Kemper Value Advisors, Inc. For Against Abstain
transferable to SKI). / / / / / /
4. For Kemper International Portfolio and Kemper
Global Income Portfolio, to approve a new
sub-advisory agreement with Zurich Investment
Management Limited (including approval of a For Against Abstain
subsequent assignment). / / / / / /
5. For Kemper Value Plus Growth Portfolio, Kemper
Horizon 20+ Portfolio, Kemper Horizon 10+
Portfolio and Kemper Horizon 5 Portfolio, to
approve a new sub-advisory agreement with For Against Abstain
Zurich Kemper Value Advisors, Inc. / / / / / /
6. To approve an amendment to the Fund's Agreement For Against Abstain
and Declaration of Trust. / / / / / /
</TABLE>
THE BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE "FOR" ALL ITEMS.
Signature(s) (All registered owners of accounts shown above must sign.
If signing for a corporation, estate or trust, please indicate your capacity or
title.)
<TABLE>
<S><C>
- ------------------------------------- ---------- ---------------------------------------- ----------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
</TABLE>
- --------------------------------------------------------------------------------
