<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
INVESTORS FUND SERIES
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than 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 0-12.
(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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
November 6, 1998
Kemper
Important News
Important News
for Investors Fund Series Shareholders
While we encourage you to read the full text of the enclosed Proxy Statement,
here's a brief overview of some matters affecting your Fund that will be the
subject of a shareholder vote.
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Q&A
QUESTIONS AND ANSWERS
Q WHAT IS HAPPENING?
A Zurich Insurance Company ("Zurich"), which is the majority owner of your
Fund's investment manager, Scudder Kemper Investments, Inc. ("Scudder Kemper"),
has combined its businesses with the financial services businesses of B.A.T
Industries p.l.c. ("B.A.T"). The resulting company, Zurich Financial Services
("Zurich Financial Services"), has become Zurich's parent company. Although this
transaction will have virtually no effect on the operations of Scudder Kemper or
your Fund, we are asking the Fund's shareholders to approve a new investment
management agreement to assure that there is no interruption in the services
Scudder Kemper provides to your Fund. The following pages give you additional
information about Zurich Financial Services, the new investment management
agreement and certain other matters. THE BOARD MEMBERS OF YOUR FUND, INCLUDING
THOSE WHO ARE NOT AFFILIATED WITH THE FUND, SCUDDER KEMPER OR ZURICH, RECOMMEND
THAT YOU VOTE FOR APPROVAL OF THE NEW INVESTMENT MANAGEMENT AGREEMENT.
Q WHY AM I BEING ASKED TO VOTE ON THE NEW INVESTMENT MANAGEMENT AGREEMENT?
A As a result of the Zurich-B.A.T transaction, the former shareholders of B.A.T
indirectly own a 43% interest in Zurich through a new holding company, Allied
Zurich p.l.c. This change in ownership of Zurich may be deemed to have caused a
"change in control" of Scudder Kemper, even though Scudder Kemper's operations
will not change as a result. The Investment Company Act of 1940, which regulates
investment companies such as your Fund, requires that fund shareholders approve
a new investment management agreement whenever there is a change in control of a
fund's investment manager (even in the most technical sense). Pursuant to an
exemptive order issued by the Securities and Exchange Commission, your Fund
entered into a new investment management agreement, subject to receipt of
shareholder approval within 150 days. Accordingly, we are seeking shareholder
approval of the new investment management agreement with your Fund.
KEMPER LOGO KEMPER LOGO
<PAGE> 3
Q HOW WILL THE ZURICH-B.A.T TRANSACTION AFFECT ME AS A FUND SHAREHOLDER?
A We do not expect the transaction to affect you as a Fund shareholder. Your
Fund and your Fund's investment objectives will not change as a result of the
transaction. You will still own the same shares in the same Fund. The new
investment management agreement is substantially identical to the former
investment management agreement, except for the dates of execution and
termination. Similarly, the other service arrangements between your Fund and
Scudder Kemper or affiliates of Scudder Kemper will not be affected by the
transaction. If shareholders do not approve the new investment management
agreement, the agreement will terminate and the Board Members of your Fund will
take such action as they deem to be in the best interests of your Fund and its
shareholders.
Q WILL THE INVESTMENT MANAGEMENT FEES INCREASE?
A No, the investment management fee rates paid by your Fund will remain the
same.
Q WHAT OTHER MATTERS AM I BEING ASKED TO VOTE ON?
A Shareholders of certain Funds are being asked to vote for approval of a new
sub-advisory agreement on the same terms as the former sub-advisory agreement.
In addition, in order to save your Fund the expense of a subsequent meeting, a
vote is also being sought for the modification or elimination of certain
policies and the elimination of the shareholder approval requirement as to
certain other matters, in order to simplify and modernize matters relating to
the Fund's policies and objective(s).
Q HOW DO THE BOARD MEMBERS OF MY FUND RECOMMEND THAT I VOTE?
A After careful consideration, the Board Members of your Fund, including those
who are not affiliated with the Fund, Scudder Kemper or Zurich, recommend that
you vote FOR the Proposals on the enclosed proxy card(s).
Q WILL THE FUND PAY FOR THIS PROXY SOLICITATION?
A No, Zurich or its affiliates will bear these costs.
Q WHOM DO I CALL FOR MORE INFORMATION?
A Please call the telephone number printed on the stub of your proxy card (or,
for contract holders, your voting instruction card).
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 applicable issues shown on each proxy card that you receive.
Please vote on each applicable issue using blue or black ink to mark an X in
one of the three boxes provided on each proxy card. On Item 3, mark For All
Applicable Proposals Except As Noted Below, Against All or Abstain All. If you
wish to vote against a particular proposal in Item 3, you should mark the For
All Applicable Proposals Except As Noted Below box and print the proposal
number on the line provided. On all other applicable 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
INVESTORS FUND SERIES
222 South Riverside Plaza
Chicago, Illinois 60606
November 6, 1998
Dear Shareholders:
Zurich Insurance Company, the majority owner of Scudder Kemper Investments,
Inc., has combined its businesses with the financial services businesses of
B.A.T Industries p.l.c. The resulting company, Zurich Financial Services, has
become the parent company of Zurich and the majority owner of Scudder Kemper. As
a result of this transaction, we are asking the shareholders of each of the
funds for which Scudder Kemper acts as investment manager, including your Fund,
to approve a new investment management agreement with Scudder Kemper.
The Zurich-B.A.T transaction should not affect you as a Fund shareholder.
Your Fund shares will not change, the advisory fee rates and expenses paid by
your Fund will not increase and the investment objectives of your Fund will
remain the same.
Shareholders are also being asked to approve certain other matters that
have been set forth in the Notice of Meeting. AFTER CAREFUL REVIEW, THE MEMBERS
OF YOUR FUND'S BOARD HAVE APPROVED THE NEW INVESTMENT MANAGEMENT AGREEMENT. THE
BOARD MEMBERS OF YOUR FUND BELIEVE THAT EACH OF THE PROPOSALS SET FORTH IN THE
NOTICE OF MEETING FOR YOUR FUND IS IMPORTANT AND RECOMMEND THAT YOU READ THE
ENCLOSED MATERIALS CAREFULLY AND THEN VOTE FOR ALL PROPOSALS.
Because all of the funds for which Scudder Kemper acts as investment
manager are holding shareholder meetings, if you own shares of more than one
fund, you will receive more than one proxy card. Please sign and return each
proxy card you receive.
Your vote is important. PLEASE TAKE A MOMENT NOW TO SIGN AND RETURN YOUR
PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE. If we do not receive
your executed proxy card(s) after a reasonable amount of time, you may receive a
telephone call from our proxy solicitor, Shareholder Communications Corporation,
reminding you to vote.
Respectfully,
/s/ Daniel Pierce
Daniel Pierce
Chairman
WE URGE YOU TO SIGN AND RETURN YOUR PROXY CARD(S) IN THE ENCLOSED POSTAGE-PAID
ENVELOPE TO ENSURE A QUORUM AT THE MEETING. YOUR VOTE IS IMPORTANT REGARDLESS OF
THE NUMBER OF SHARES YOU OWN.
2
<PAGE> 5
INVESTORS FUND SERIES
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Please take notice that a Special Meeting of Shareholders (the "Special
Meeting") of each portfolio that is listed on Appendix 1 to the Proxy Statement
(each such portfolio is referred to herein as a "Fund" and, collectively, the
"Funds") of Investors Fund Series (the "Trust") will be held at the offices of
Scudder Kemper Investments, Inc., 13th Floor, Two International Place, Boston,
Massachusetts 02110, on December 16, 1998, at 11:00 a.m., Eastern time, for the
following purposes:
PROPOSAL 1: To approve a new investment management agreement for each
Fund with Scudder Kemper Investments, Inc.;
PROPOSAL 2: (For shareholders of KGIP, KIP, KDFSP and KDHRP only) To
approve a new sub-advisory agreement for each Fund with
either Scudder Investments (U.K.) Limited or Dreman Value
Management, L.L.C.; and
PROPOSAL 3: To modify or eliminate certain policies and to eliminate
the shareholder approval requirement as to certain other
matters.
The appointed proxies will vote in their discretion on any other business
as may properly come before the Special Meeting or any adjournments thereof.
Holders of record of shares of each Fund at the close of business on
September 22, 1998 are entitled to vote at the Special Meeting and at any
adjournments thereof.
In the event that the necessary quorum to transact business or the vote
required to approve a Proposal is not obtained at the Special Meeting with
respect to one or more Funds, the persons named as proxies may propose one or
more adjournments of the Special Meeting in accordance with applicable law, to
permit further solicitation of proxies. Any such adjournment as to a matter will
require the affirmative vote of the holders of a majority of the concerned
Fund's shares present in person or by proxy at the Special Meeting. The persons
named as proxies will vote in favor of such adjournment those proxies which they
are
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<PAGE> 6
entitled to vote in favor of the Proposals and will vote against any such
adjournment those proxies to be voted against the Proposals.
By Order of the Board of Trustees,
/s/ Philip J. Collora
Philip J. Collora
Secretary
November 6, 1998
IMPORTANT -- WE URGE YOU TO SIGN AND DATE THE ENCLOSED PROXY CARD(S) AND RETURN
IT IN THE ENCLOSED ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE AND IS INTENDED
FOR YOUR CONVENIENCE. YOUR PROMPT RETURN OF THE ENCLOSED PROXY CARD(S) MAY SAVE
THE NECESSITY AND EXPENSE OF FURTHER SOLICITATIONS TO ENSURE A QUORUM AT THE
SPECIAL MEETING. IF YOU CAN ATTEND THE SPECIAL MEETING AND WISH TO VOTE YOUR
SHARES IN PERSON AT THAT TIME, YOU WILL BE ABLE TO DO SO.
<PAGE> 7
INVESTORS FUND SERIES
222 South Riverside Plaza
Chicago, Illinois 60606
PROXY STATEMENT
GENERAL
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees (the "Board") of Investors Fund Series (the
"Trust") for use at the Special Meeting of Shareholders of the portfolios of the
Trust that are listed on Appendix 1 hereto (each such portfolio is referred to
herein as a "Fund" and, collectively, the "Funds"), to be held at the offices of
Scudder Kemper Investments, Inc. ("Scudder Kemper"), 13th Floor, Two
International Place, Boston, Massachusetts 02110, on December 16, 1998 at 11:00
a.m., Eastern time, and at any and all adjournments thereof (the "Special
Meeting").
In the descriptions of the Proposals below, the various Funds of the Trust
are referred to by the acronyms listed in Appendix 1. The word "fund" is
sometimes used to mean investment companies or series thereof in general, and
not the Funds whose proxy statement this is. In addition, in this Proxy
Statement, for simplicity, actions are described as being taken by a Fund that
is a series of the Trust, although all actions are actually taken by the Trust
on behalf of the applicable series.
This Proxy Statement, the Notice of Special Meeting and the proxy cards are
first being mailed to shareholders on or about November 6, 1998 or as soon as
practicable thereafter. Any shareholder giving a proxy has the power to revoke
it by mail (addressed to the Secretary at the principal executive office of the
Funds, c/o Scudder Kemper Investments, Inc., at 222 South Riverside Plaza,
Chicago, Illinois 60606) or in person at the Special Meeting, by executing a
superseding proxy or by submitting a notice of revocation to the Fund. All
properly executed proxies received in time for the Special Meeting will be voted
as specified in the proxy or, if no specification is made, in favor of the
Proposals referred to in the Proxy Statement.
The presence at any shareholders' meeting, in person or by proxy, of the
holders of 30% of the shares of a Fund entitled to be cast shall be necessary
and sufficient to constitute a quorum for the transaction of business. In the
event that the necessary quorum to transact business or the vote required to
approve any Proposal is not obtained at the Special Meeting with respect to one
or more Funds, the persons named as proxies may propose one or more adjournments
of the Special Meeting in accordance with applicable law to permit further
solicitation of proxies with respect to the Proposal that did not receive the
vote necessary for its passage or to obtain a quorum. Any such adjournment as to
a matter will require the affirmative vote of the holders of a majority of the
concerned Fund's shares present in person or by proxy at the Special Meeting.
<PAGE> 8
The persons named as proxies will vote in favor of such adjournment those
proxies which they are entitled to vote in favor of that Proposal and will vote
against any such adjournment those proxies to be voted against that Proposal.
For purposes of determining the presence of a quorum for transacting business at
the Special Meeting, abstentions and broker "non-votes" will be treated as
shares that are present but which have not been voted. Broker non-votes are
proxies received by a Fund from brokers or nominees when the broker or nominee
has neither received instructions from the beneficial owner or other persons
entitled to vote nor has discretionary power to vote on a particular matter.
Accordingly, shareholders are urged to forward their voting instructions
promptly.
Each Proposal requires the affirmative vote of a "majority of the
outstanding voting securities" of a Fund. The term "majority of the outstanding
voting securities," as defined in the Investment Company Act of 1940, as amended
(the "1940 Act"), and as used in this Proxy Statement, means: the affirmative
vote of the lesser of (1) 67% of the voting securities of each Fund present at
the meeting if more than 50% of the outstanding voting securities of the Fund
are present in person or by proxy or (2) more than 50% of the outstanding voting
securities of each Fund.
Abstentions will have the effect of a "no" vote on each Proposal. Broker
non-votes will have the effect of a "no" vote on each Proposal, each of which
requires the approval of a specified percentage of the outstanding shares of
each Fund, if such vote is determined on the basis of obtaining the affirmative
vote of more than 50% of the outstanding voting securities of the Fund. Broker
non-votes will not constitute "yes" or "no" votes, and will be disregarded in
determining the voting securities "present" if such vote is determined on the
basis of the affirmative vote of 67% of the voting securities of the Fund
present at the Special Meeting with respect to each Proposal.
Shares of the Funds are offered only to insurance companies (each an
"Insurance Company") to fund benefits under their variable annuity contracts and
variable life insurance policies (each a "Contract"). Accordingly, as of the
Record Date (as defined below), shares of each of the Funds were held by
separate accounts, or sub-accounts thereof, of various Insurance Companies.
These shares are owned by the Insurance Companies as depositors for their
respective Contracts issued to individual contract holders or to a group (e.g.,
a defined benefit plan) in which individuals participate (collectively,
"Participants"). Under the terms of the Contracts, Participants have the right
to instruct the Insurance Companies on how to vote the shares related to their
interests through their Contracts (i.e., pass-through voting). An Insurance
Company must vote the shares of the Funds held in its name as directed. If an
Insurance Company does not receive voting instructions for all of the shares of
a particular Fund held under the Contracts, it may vote all of the shares in the
relevant separate accounts with respect to each proposal on which it is entitled
to vote, for, against or abstaining, in the same proportion as the shares of
that Fund for
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<PAGE> 9
which it has received instructions (i.e., echo voting). The group Participants
of some group Contracts may have the right to direct the vote, with respect to
each proposal on which they are entitled to vote, for all shares of a particular
Fund held under the Contract, for, against or abstaining, in the same
proportions as shares for which instructions have been given under the same
Contract. This Proxy Statement is used to solicit instructions from Participants
for voting shares of the Funds as well as for soliciting proxies from the
Insurance Companies, the actual shareholders of the Funds. All persons entitled
to direct the voting of shares, whether or not they are shareholders, will be
described as voting for purposes of this Proxy Statement.
Shareholders of each Fund will vote separately with respect to each
Proposal.
Holders of record of the shares of each Fund at the close of business on
September 22, 1998 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. The table provided in Appendix 2 hereto sets forth the number
of shares outstanding for each Fund as of June 30, 1998.
Appendix 3 sets forth the beneficial owners of at least 5% of a Fund's
shares. To the best of the Trust's knowledge, as of June 30, 1998, no person
owned beneficially more than 5% of any Fund's outstanding shares, except as
stated in Appendix 3.
As of June 30, 1998, the Trustees of each Fund owned directly or
beneficially none of the outstanding shares of any Fund.
Each Fund provides periodic reports to all of its shareholders which
highlight relevant information, including investment results and a review of
portfolio changes. You may receive an additional copy of the most recent annual
report for each Fund and a copy of any more recent semi-annual report, without
charge, by calling 1-800-621-1048 or writing the Fund, c/o Scudder Kemper
Investments, Inc., at 222 South Riverside Plaza, Chicago, Illinois 60606.
3
<PAGE> 10
TABLE OF PROPOSALS
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Proposal 1: Approval of a New Investment Management Agreement for
each Fund with Scudder Kemper Investments, Inc.
All Funds............................................ 6
Proposal 2: Approval of a New Sub-Advisory Agreement for each
Fund with either Scudder Investments (U.K.) Limited
or Dreman Value Management, L.L.C.
KGIP, KIP, KDFSP and KDHRP........................... 20
Proposal 3: Approval of the Modification or Elimination of
Certain Policies and the Elimination of the
Shareholder Approval Requirement as to Certain Other
Matters
ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO
AMEND INVESTMENT OBJECTIVES AND INVESTMENT POLICIES
3.0 Investment Objectives
All Funds...................................... 28
3.1 Investment Policies
KBCP, KCVP, KGIP, KGSP, KGP, KHYP, KH10P,
KH20P, KH5P, KIP, KIGBP, KMMP, KSCGP, KSCVP,
KTRP, KVGP..................................... 28
REVISION OF FUNDAMENTAL POLICIES MANDATED BY THE 1940
ACT
3.2 Diversification
(a) All Funds (except for KGIP)............... 29
(b) KGIP...................................... 30
3.3 Borrowing
All Funds (except for KGBCP, KIGIP and 30
KDFSP).........................................
3.4 Senior Securities
All Funds (except for KGBCP, KIGIP and 31
KDFSP).........................................
3.5 Concentration
(a) All Funds (except for KGBCP, KIGIP, KDFSP
and KMMP)................................. 31
(b) KMMP...................................... 32
3.6 Underwriting of Securities
All Funds...................................... 32
3.7 Investment in Real Estate
All Funds...................................... 32
3.8 Purchase of Commodities
All Funds (except for KGBCP, KIGIP and 32
KDFSP).........................................
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3.9 Lending
All Funds...................................... 33
ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO
CHANGE OTHER FUNDAMENTAL POLICIES
3.10 Margin Purchases and Short Sales
All Funds (except for KGBCP, KIGIP and 34
KDFSP).........................................
3.11 Purchase of Securities of Related Issuers
KMMP........................................... 34
3.12 Pledging of Assets
KBCP, KGIP, KIP and KDHRP...................... 35
3.13 Purchases of Securities
All Funds (except for KGBCP, KHYP, KIGIP, KDFSP
and KDHRP)..................................... 35
3.14 Purchases of Options
KBCP, KGIP, KGP, KHYP, KH10P, KH20P, KH5P, KIP,
KIGBP, KMMP, KSCGP and KTRP.................... 35
3.15 Restricted and Illiquid Securities
KMMP........................................... 35
3.16 Investment in Mineral Exploration
KDHRP.......................................... 36
3.17 Investment in Issuers With Short Histories
KMMP........................................... 36
3.18 Investment in other Investment Companies
KGSP, KGP, KHYP, KIP, KMMP and KTRP............ 36
3.19 Investment other than in Accordance with
Objectives and Policies
KMMP........................................... 37
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PROPOSAL 1: APPROVAL OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INTRODUCTION
Scudder Kemper acts as the investment manager to each Fund pursuant to an
investment management agreement entered into by each Fund and Scudder Kemper.
The investment management agreement in effect between each Fund and Scudder
Kemper prior to the consummation of the transaction between Zurich Insurance
Company ("Zurich") and B.A.T Industries p.l.c. ("B.A.T") (the "Zurich-B.A.T
Transaction" or the "Transaction"), which is described below, is referred to in
this Proxy Statement as a "Former Investment Management Agreement,"
collectively, the "Former Investment Management Agreements." The investment
management agreement currently in effect between each Fund and Scudder Kemper,
which is also described below, was executed as of the consummation of the
Zurich-B.A.T Transaction and is referred to in this Proxy Statement as a "New
Investment Management Agreement," collectively, the "New Investment Management
Agreements" and, together with the Former Investment Management Agreements, the
"Investment Management Agreements." (Scudder Kemper is sometimes referred to in
this Proxy Statement as the "Investment Manager.")
The information set forth in this Proxy Statement and the accompanying
materials concerning the Transaction, Scudder Kemper, Zurich, B.A.T and their
respective affiliates has been provided to the Funds by Scudder Kemper based
upon information that Scudder Kemper received from Zurich and its affiliates.
On June 26, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") entered into
an agreement with Zurich pursuant to which Scudder and Zurich agreed to form an
alliance. On December 31, 1997, Zurich acquired a majority interest in Scudder,
and Zurich Kemper Investments, Inc. ("Kemper"), a Zurich subsidiary, became part
of Scudder. Scudder's name was changed to Scudder Kemper Investments, Inc. The
transaction between Scudder and Zurich (the "Scudder-Zurich Transaction")
resulted in the termination of each Fund's investment management agreement with
Kemper. Consequently, the Former Investment Management Agreement between each
Fund and Scudder Kemper was approved by the Trust's Board and by each Fund's
shareholders.
The Zurich-B.A.T Transaction. On December 22, 1997, Zurich and B.A.T
entered into a definitive agreement (the "Merger Agreement") pursuant to which
businesses of Zurich (including Zurich's almost 70% ownership interest in
Scudder Kemper) were to be combined with the financial services businesses of
B.A.T. On October 12, 1997, Zurich and B.A.T had confirmed that they were
engaged in discussions concerning a possible business combination; on October
16, 1997, Zurich and B.A.T announced that they had entered into an Agreement in
Principle, dated as of October 15, 1997 (the "Agreement in Principle"), to merge
B.A.T's financial services businesses with Zurich's businesses. The Merger
Agreement superseded the Agreement in Principle.
6
<PAGE> 13
In order to effect this combination, Zurich and B.A.T first reorganized
their respective operations. Zurich became a subsidiary of a new Swiss holding
company, Zurich Allied AG, and Zurich shareholders became Zurich Allied AG
shareholders. At the same time, B.A.T separated its financial services business
from its tobacco-related businesses by spinning off to its shareholders a new
British company, Allied Zurich p.l.c., 22 Arlington Street, London, England SW1A
1RW, United Kingdom, which held B.A.T's financial services businesses.
Zurich Allied AG then contributed its interest in Zurich, and Allied Zurich
p.l.c. contributed the B.A.T financial services businesses, to a jointly owned
company, Zurich Financial Services ("Zurich Financial Services"), in each case
in exchange for shares of Zurich Financial Services. These transactions were
completed on September 7, 1998. As a result, upon the completion of the
Transaction, the former Zurich shareholders became the owners (through Zurich
Allied AG) of 57% of the voting stock of Zurich Financial Services, and former
B.A.T shareholders initially became the owners (through Allied Zurich p.l.c.) of
43% of the voting stock of Zurich Financial Services. Zurich Financial Services
now owns Zurich and the financial services businesses previously owned by B.A.T.
7
<PAGE> 14
Below is a simplified chart showing the corporate structure of Zurich
Financial Services after these transactions:
[ZURICH FINANCIAL SERVICES FLOW CHART]
Corporate Governance. At the closing of the Zurich-B.A.T Transaction, the
parties entered into a Governing Agreement that establishes the corporate
governance structure for Zurich Allied AG, Allied Zurich p.l.c. and Zurich
Financial Services.
The Board of Directors of Zurich Financial Services consists of ten
members, five of whom were initially selected by Zurich and five by B.A.T. Mr.
Rolf Huppi, Zurich's Chairman and Chief Executive Officer, became Chairman and
Chief Executive Officer of Zurich Financial Services. In addition to his vote by
virtue of
8
<PAGE> 15
his position on the Board of Directors, as Chairman, Mr. Huppi will have a tie-
breaking vote on all matters except recommendations of the Audit Committee,
recommendations of the Remuneration Committee in respect of the remuneration of
the Chairman and the CEO, appointment and removal of the Chairman and CEO,
appointments to the Nominations, Audit and Remuneration Committees and
nominations to the Board of Directors not made through the Nominations
Committee.
The Group Management Board of Zurich Financial Services has been given
responsibility by the Board of Directors for the executive management of Zurich
Financial Services and has wide authority for such purpose. Of the 11 initial
members of the Group Management Board, eight were members of the Corporate
Executive Board of Zurich (including Mr. Edmond D. Villani, CEO of Scudder
Kemper, who is responsible for Global Asset Management for Zurich Financial
Services), and three were B.A.T executives.
The Board of Directors of Zurich Allied AG initially consists of 11
members, eight of whom were Zurich directors and three of whom were proposed by
B.A.T. The Board of Directors of Allied Zurich p.l.c. also initially consists of
11 members, eight of whom were B.A.T directors and three of whom were proposed
by Zurich. The parties have agreed that, as soon as possible, the Boards of
Directors of Zurich Financial Services, Zurich Allied AG and Allied Zurich
p.l.c. will have identical membership.
Shareholder resolutions of Zurich Financial Services in general require
approval by at least 58% of all shares outstanding.
The Governing Agreement also contains provisions relating to dividend
equalization and provisions intended to ensure equal treatment of Zurich Allied
AG and Allied Zurich p.l.c. shareholders in the event of a takeover bid for
either company.
The B.A.T financial services businesses, which, since the closing of the
Transaction, are owned by Zurich Financial Services, include: the Farmers Group
of Insurance companies; Eagle Star Reinsurance Company Ltd., UK ("Eagle
Star")(which Zurich Financial Services has agreed to sell to GE Capital);
Allied-Dunbar, one of the leading U.K. unit-linked life insurance and pensions
companies; and Threadneedle Asset Management, which was formed initially to
manage the investment assets of Eagle Star and Allied-Dunbar, and which, at
December 31, 1997, had $58.8 billion under management. Overall, at year-end
1997, the financial services businesses of B.A.T had $79 billion in assets under
management, including $18 billion in third party assets.
Zurich has informed the Funds that the financial services businesses of
B.A.T do not include any of B.A.T's tobacco businesses and that, after careful
review, Zurich has concluded that the tobacco-related liabilities connected with
B.A.T's tobacco business should not adversely affect Zurich or the present
Zurich subsidiaries, including Scudder Kemper.
Governance arrangements that were put in place at the time of the
acquisition of Zurich's 70% interest in Scudder Kemper (which are discussed
9
<PAGE> 16
below under "Investment Manager") remain unaffected by the Transaction. These
arrangements preclude the making of certain major decisions affecting Scudder
Kemper without the approval of Scudder Kemper directors elected by the
non-Zurich shareholders of Scudder Kemper.
Consummation of the Zurich-B.A.T Transaction may be deemed to have
constituted an "assignment," as that term is defined in the 1940 Act, of each
Fund's Former Investment Management Agreement with Scudder Kemper. As required
by the 1940 Act, each of the Former Investment Management Agreements provided
for its automatic termination in the event of its assignment. Accordingly, a New
Investment Management Agreement between each Fund and Scudder Kemper was
approved by the Board members of each Fund and is now being proposed for
approval by shareholders of each Fund. Scudder Kemper has received an exemptive
order from the Securities and Exchange Commission (the "SEC" or the
"Commission") permitting each Fund to obtain shareholder approval of its New
Investment Management Agreement within 150 days after the consummation of the
Transaction, which occurred on September 7, 1998 (and, consequently, within 150
days after the termination of its Former Investment Management Agreement),
instead of before the consummation of the Transaction. Pursuant to the exemptive
order, each Fund's investment management fees are being held in escrow until the
earlier of shareholder approval of the Fund's New Investment Management
Agreement or the expiration of the 150 day period. A copy of the master form of
New Investment Management Agreement is attached hereto as Exhibit A. THE NEW
INVESTMENT MANAGEMENT AGREEMENT FOR EACH FUND IS SUBSTANTIALLY IDENTICAL TO THE
CORRESPONDING FORMER INVESTMENT MANAGEMENT AGREEMENT, EXCEPT FOR THE DATES OF
EXECUTION AND TERMINATION. In addition, the Board was advised that the portfolio
managers for each Fund will not change as a result of the Transaction, although,
since the announcement of the Transaction, the lead portfolio manager of KGIP
has been replaced by another member of the Fund's portfolio management team. The
material terms of the Investment Management Agreements are described under
"Description of the Investment Management Agreement" below.
BOARD'S RECOMMENDATION
On July 17, 1998, the Board of the Trust met and the Board members of the
Trust, including the Board members who are not parties to such agreement or
"interested persons" (as defined in the 1940 Act) (the "Non-Interested Trustees"
or "Non-Interested Board members") of any such party, voted to approve the New
Investment Management Agreements and to recommend approval to the shareholders
of each applicable Fund.
For information about the Board's deliberations and the reasons for their
recommendation, please see "Board's Evaluation" below.
10
<PAGE> 17
BOARD'S EVALUATION
The Board met on July 17, 1998 to consider the Transaction and its effects
on the Funds. The Board met with senior management personnel of Scudder Kemper.
The Board had the assistance of legal counsel, who prepared among other things,
an analysis of the Board's fiduciary obligations. As a result of its review and
consideration of the Transaction and the proposed new investment management
agreement, the Board voted unanimously to approve the applicable New Investment
Management Agreement and to recommend it to the shareholders of the respective
Fund for their approval.
In connection with its review, Scudder Kemper represented to the Board
that: the Transaction will have no effect on the operational management of any
Fund; the Transaction will not result in any change in the management or
operations of Scudder Kemper; there will not be any increase in the advisory fee
or any change in any other provision, other than the term, of any Investment
Management Agreement as a result of the Transaction; the Transaction will not
adversely affect Scudder Kemper's financial condition; and the Transaction
should expand Scudder Kemper's global asset management capabilities and enhance
Scudder Kemper's research capabilities, particularly with respect to the United
Kingdom and Europe.
In connection with its deliberations, the Board obtained certain assurances
from Zurich, including the following:
- Zurich has provided to the Board such information as is reasonably
necessary to evaluate the New Investment Management and other agreements.
- Zurich looks upon Scudder Kemper as the core of Zurich's global asset
management strategy. With that focus, Zurich will devote to Scudder
Kemper and its affairs all attention and resources that are necessary to
provide for the Funds top quality investment management, shareholder,
administrative and product distribution services.
- The Transaction will not result in any change in any Fund's investment
objectives or policies.
- The Transaction will not result in any change in the management or
operations of Scudder Kemper or its subsidiaries.
- The Transaction is not expected to result in any adverse change in the
investment management or operations of any Fund; and Zurich neither plans
nor proposes, for the foreseeable future, to make any material change in
the manner in which investment advisory services or other services are
rendered to any Fund which has the potential to have a material adverse
effect upon the Fund.
- Zurich is committed to the continuance, without interruption, of services
to the Funds of the type and quality currently provided by Scudder Kemper
and its subsidiaries, or superior thereto.
11
<PAGE> 18
- Zurich plans to maintain or enhance Scudder Kemper's facilities and
organization.
- In order to retain and attract key personnel, Zurich intends for Scudder
Kemper to maintain overall compensation policies and practices at market
levels or better.
- Zurich intends to maintain the distinct brand identity of the Kemper and
Scudder Funds and is committed to strengthening and enhancing both brands
and the distribution channels for both families of funds, while
maintaining their separate brand identity.
- Zurich will promptly advise the Board of decisions materially affecting
the Scudder Kemper organization as they relate to a Fund. Neither this,
nor any of the other above commitments will be altered by Zurich without
the Board's prior consideration.
Zurich assured the Board that it intends to comply with Section 15(f) of
the 1940 Act, which provides a non-exclusive safe harbor for an investment
adviser to an investment company or any of the investment adviser's affiliated
persons (as defined in the 1940 Act) to receive any amount or benefit in
connection with a change in control of the investment adviser so long as two
conditions are met. First, for a period of three years after the transaction, at
least 75% of the board members of the investment company must not be "interested
persons" of the investment company's investment adviser or its predecessor
adviser. On or prior to the consummation of the Transaction, the Board was in
compliance with this provision of Section 15(f). Second, an "unfair burden" must
not be imposed upon the investment company as a result of such transaction or
any express or implied terms, conditions or understandings applicable thereto.
The term "unfair burden" is defined in Section 15(f) to include any arrangement
during the two-year period after the transaction whereby the investment adviser,
or any interested person of any such adviser, receives or is entitled to receive
any compensation, directly or indirectly, from the investment company or its
shareholders (other than fees for bona fide investment advisory or other
services) or from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the investment company
(other than bona fide ordinary compensation as principal underwriter for such
investment company). Zurich has advised the Board that it is not aware of any
express or implied term, condition, arrangement or understanding that would
impose an "unfair burden" on the Funds as a result of the Transaction. Zurich
has agreed that it, and its affiliates, will take no action that would have the
effect of imposing an "unfair burden" on the Funds as a result of the
Transaction. In furtherance thereof, Zurich has undertaken to pay the costs of
preparing and distributing proxy materials to and of holding the meeting of the
Funds' shareholders as well as other fees and expenses in connection with the
Transaction, including the fees and expenses of legal counsel to the Funds and
the Non-Interested Board members.
12
<PAGE> 19
The Board also considered whether tobacco-related liability connected with
B.A.T's tobacco business could adversely affect the Adviser and the services
provided to the Fund. (See "Corporate Governance" in the "Introduction" above.)
In evaluating the New Investment Management Agreements, the Board took into
account that the fees and expenses payable by each Fund under its New Investment
Management Agreement are the same as under its Former Investment Management
Agreement, that the services provided to each Fund are the same and that the
other terms are, except for the dates of execution and termination,
substantially similar. The Board also took into consideration that the portfolio
managers and research personnel would continue their functions with Scudder
Kemper after the Transaction. The Board noted that, in previously approving the
Former Investment Management Agreements, the Board had considered a number of
factors, including the nature and quality of services provided by Scudder
Kemper; investment performance, both that of each Fund itself and relative to
that of competitive investment companies; investment management fees and expense
ratios of each Fund and competitive investment companies; Scudder Kemper's
profitability from managing each Fund; fall-out benefits to Scudder Kemper from
its relationship to each Fund, including revenues derived from services provided
to the Fund by affiliates of Scudder Kemper; and the potential benefits to
Scudder Kemper and to each 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 discussed the Transaction with the senior management of Scudder
Kemper and Zurich and among themselves. The Board considered that Zurich is a
large, well-established company with substantial resources, and, as noted above,
has undertaken to devote such resources to Scudder Kemper as are necessary to
provide the Funds with top quality services.
As a result of their review and consideration of the Transaction and the
New Investment Management Agreements, at their meeting the Board of the Trust
voted to approve the New Investment Management Agreements and to recommend their
approval to the shareholders of each Fund.
DESCRIPTION OF THE INVESTMENT MANAGEMENT AGREEMENTS
Except as disclosed below, all Former and New Investment Management
Agreements are substantially identical. Under the Investment Management
Agreements, Scudder Kemper provides each Fund with continuing investment
management services. The Investment Manager also determines which securities
should be purchased, held, or sold, and what portion of each Fund's assets
should be held uninvested, subject to the Trust's Charter, By-Laws, investment
policies and restrictions, the provisions of the 1940 Act, and such policies and
instructions as the Trustees may have determined.
Each Investment Management Agreement provides that the Investment Manager
will provide portfolio management services, place portfolio transac-
13
<PAGE> 20
tions in accordance with policies expressed in each Fund's registration
statement, pay each Fund's office rent, and render significant administrative
services on behalf of each Fund (not otherwise provided by third parties)
necessary for each Fund's operating as an open-end investment company,
including, but not limited to, preparing reports to and meeting materials for
the Trust's Board and reports and notices to Fund shareholders; supervising,
negotiating contractual arrangements with, to the extent appropriate, and
monitoring the performance of various third-party and affiliated service
providers to each Fund (such as each Fund's transfer and pricing agents, fund
accounting agent, custodian, accountants and others) and other persons in any
capacity deemed necessary or desirable to Fund operations; preparing and making
filings with the SEC and other regulatory and self-regulatory organizations,
including but not limited to, preliminary and definitive proxy materials,
post-effective amendments to the Registration Statement, semi-annual reports on
Form N-SAR and notices pursuant to Rule 24f-2 under the 1940 Act; overseeing the
tabulation of proxies by each Fund's transfer agent; assisting in the
preparation and filing of each Fund's federal, state and local tax returns;
preparing and filing each Fund's federal excise tax returns pursuant to Section
4982 of the Internal Revenue Code of 1986, as amended; providing assistance with
investor and public relations matters; monitoring the valuation of portfolio
securities and the calculation of net asset value; monitoring the registration
of shares of each Fund under applicable federal and state securities laws;
maintaining or causing to be maintained for each Fund all books, records and
reports and any other information required under the 1940 Act, to the extent
such books, records and reports and other information are not maintained by each
Fund's custodian or other agents of each Fund; assisting in establishing
accounting policies of each Fund; assisting in the resolution of accounting
issues that may arise with respect to each Fund's operations and consulting with
each Fund's independent accountants, legal counsel and other agents as necessary
in connection therewith; establishing and monitoring each Fund's operating
expense budgets; reviewing each Fund's bills; processing the payment of bills
that have been approved by an authorized person; assisting each Fund in
determining the amount of dividends and distributions available to be paid by
each Fund to its shareholders, preparing and arranging for the printing of
dividend notices to shareholders, and providing the transfer and dividend paying
agent, the custodian, and the accounting agent with such information as is
required for such parties to effect the payment of dividends and distributions;
and otherwise assisting each Fund in the conduct of its business, subject to the
direction and control of the Trust's Board.
Under each Investment Management Agreement, each Fund is responsible for
other expenses, including organizational expenses (including out-of-pocket
expenses, but not including the Investment Manager's overhead or employee
costs); brokers' commissions or other costs of acquiring or disposing of any
portfolio securities of each Fund; legal, auditing and accounting expenses;
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; taxes and governmental fees;
the fees and
14
<PAGE> 21
expenses of each Fund's transfer agent; expenses of preparing share certificates
and any other expenses, including clerical expenses, of issuance, offering,
distribution, sale, redemption or repurchase of shares; the expenses of and fees
for registering or qualifying securities for sale; the fees and expenses of Non-
Interested Trustees; the cost of printing and distributing reports, notices and
dividends to current shareholders; and the fees and expenses of each Fund's
custodians, subcustodians, accounting agent, dividend disbursing agents and
registrars. Each Fund may arrange to have third parties assume all or part of
the expenses of sale, underwriting and distribution of shares of each Fund. Each
Fund is also responsible for expenses of shareholders' and other meetings and
its expenses incurred in connection with litigation and the legal obligation it
may have to indemnify officers and Trustees of the Trust with respect thereto.
Each Fund is also responsible for the maintenance of books and records which are
required to be maintained by each Fund's custodian or other agents of each
Trust; telephone, telex, facsimile, postage and other communications expenses;
any fees, dues and expenses incurred by each Fund in connection with membership
in investment company trade organizations; expenses of printing and mailing
prospectuses and statements of additional information of each Fund and
supplements thereto to current shareholders; costs of stationery; fees payable
to the Investment Manager and to any other Fund advisors or consultants;
expenses relating to investor and public relations; interest charges, bond
premiums and other insurance expense; freight, insurance and other charges in
connection with the shipment of each Fund's portfolio securities; and other
expenses.
The Investment Manager is responsible for the payment of the compensation
and expenses of all Trustees, officers and executive employees of each Fund
(including each Fund's share of payroll taxes) affiliated with the Investment
Manager and making available, without expense to each Fund, the services of such
Trustees, officers and employees as may duly be elected officers of each Trust,
subject to their individual consent to serve and to any limitations imposed by
law. Each Fund is responsible for the fees and expenses (specifically including
travel expenses relating to Fund business) of Trustees not affiliated with the
Investment Manager. Under each Investment Management Agreement, the Investment
Manager also pays each Fund's share of payroll taxes. During each Fund's most
recent fiscal year, no compensation, direct or otherwise (other than through
fees paid to the Investment Manager), was paid or became payable by each Trust
to any of its officers or Trustees who were affiliated with the Investment
Manager.
In return for the services provided by the Investment Manager as investment
manager and the expenses it assumes under each Investment Management Agreement,
each Fund pays the Investment Manager a management fee which is accrued daily
and payable monthly. The management fee rate for each Fund under the Investment
Management Agreements is set forth in Appendix 4 hereto. As of the end of each
Fund's last fiscal year, each Fund, except Kemper-Dreman High Return Equity
Portfolio, Kemper-Dreman Financial Services Portfolio, Kemper Global Blue Chip
Portfolio and Kemper International Growth and
15
<PAGE> 22
Income Portfolio, each of which did not commence operations until May 1,
1998, had net assets and paid an aggregate management fee to the Investment
Manager during such period as also set forth in Appendix 4 hereto.
Each Investment Management Agreement further provides that the Investment
Manager shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with matters to which such agreement
relates, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of the Investment Manager in the performance of its
duties or from reckless disregard by the Investment Manager of its obligations
and duties under such agreement. Each Investment Management Agreement also
provides that purchase and sale opportunities, which are suitable for more than
one client of the Investment Manager, will be allocated by the Investment
Manager in an equitable manner. Lastly, each Investment Management Agreement
contains a provision stating that it supersedes all prior agreements.
Each Investment Management Agreement may be terminated without penalty upon
sixty (60) days' written notice by either party. Each Fund may agree to
terminate its Investment Management Agreement either by the vote of a majority
of the outstanding voting securities of the Fund, or by a vote of the Board.
Each Investment Management Agreement may also be terminated at any time without
penalty by the vote of a majority of the outstanding voting securities of the
Fund or by a vote of the Board if a court establishes that the Investment
Manager or any of its officers or directors has taken any action resulting in a
breach of the Investment Manager's covenants under the Investment Management
Agreement. As stated above, each Investment Management Agreement automatically
terminates in the event of its assignment.
Scudder Kemper or one of its predecessors has acted as the Investment
Manager for each Fund as of the date set forth in the table in Appendix 5
hereto. Also shown in Appendix 5 is the date of each Former Investment
Management Agreement, the date when each Former Investment Management Agreement
was last approved by the shareholders of each Fund, the date when each New
Investment Management Agreement was last approved by the Trustees and the date
to which each New Investment Management Agreement was last continued. Each
Former Investment Management Agreement was last submitted to shareholders (or,
in some cases, to a Fund's sole shareholder) prior to its becoming effective, as
required by the 1940 Act, in connection with the Scudder-Zurich Transaction.
THE NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreement for each Fund, which is currently
in effect, is dated the date of the consummation of the Transaction, which
occurred on September 7, 1998. Each New Investment Management Agreement was to
be in effect for an initial term ending on April 1, 1999, and to be continued
thereafter from year to year only if specifically approved at least annually by
the vote of "a majority of the outstanding voting securities" of each
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<PAGE> 23
Fund, or by the Board and, in either event, the vote of a majority of the Non-
Interested Trustees, cast in person at a meeting called for such purpose. At a
meeting held on September 22, 1998, the Board, including a majority of the
Non-Interested Trustees, approved the continuance of each New Investment
Management Agreement through September 30, 1999. In the event that shareholders
of a Fund do not approve the New Investment Management Agreement, it will
terminate. In such event, the Board will take such action as it deems to be in
the best interests of the Fund and its shareholders.
DIFFERENCES BETWEEN THE FORMER AND NEW INVESTMENT MANAGEMENT AGREEMENTS
The New Investment Management Agreements are substantially identical to the
Former Investment Management Agreements, except for the dates of execution and
termination.
INVESTMENT MANAGER
Scudder Kemper, an indirect subsidiary of Zurich which resulted from the
combination of the businesses of Scudder and Kemper in connection with the
Scudder-Zurich Transaction, is one of the largest and most experienced
investment counsel firms in the United States. Scudder was established in 1919
as a partnership and was restructured as a Delaware corporation in 1985. Scudder
launched its first fund in 1928. Kemper launched its first fund in 1948. Since
December 31, 1997, Scudder Kemper has served as investment adviser to both
Scudder and Kemper funds. As of August 31, 1998, Scudder Kemper has more than
$241.1 billion in assets under management. The principal source of Scudder
Kemper's income is professional fees received from providing continuing
investment advice. Scudder Kemper provides investment counsel for many
individuals and institutions, including insurance companies, endowments,
industrial corporations and financial and banking organizations.
Founded in 1872, Zurich is a multinational, public corporation organized
under the laws of Switzerland. Its home office (and the home offices of Zurich
Financial Services and Zurich Allied AG) is located at Mythenquai 2, 8002
Zurich, Switzerland. Historically, Zurich's earnings have resulted from its
operations as an insurer as well as from its ownership of its subsidiaries and
affiliated companies (the "Zurich Insurance Group"). Zurich and the Zurich
Insurance Group provide an extensive range of insurance products and services
and have branch offices and subsidiaries in more than 40 countries throughout
the world. Zurich owns approximately 70% of the Investment Manager, with the
balance owned by the Investment Manager's officers and employees.
As stated above, Scudder Kemper is a Delaware corporation. Rolf Huppi* is
the Chairman of the Board and Director, Edmond D. Villani(#) is the President,
- ------------------------------
* Mythenquai 2, Zurich, Switzerland
(#) 345 Park Avenue, New York, New York
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<PAGE> 24
Chief Executive Officer and Director, Stephen R. Beckwith(#) is the Treasurer
and Chief Financial Officer, Kathryn L. Quirk(#) is the General Counsel, Chief
Compliance Officer and Secretary, Lynn S. Birdsong(#) is a Corporate Vice
President and Director, Cornelia M. Small(#) is a Corporate Vice President and
Director, Laurence Cheng* is a Director, and, effective November 1, 1998, each
of Gunther Gose* and William H. Bolinder(+) is a Director of the Investment
Manager. The principal occupation of each of Edmond D. Villani, Stephen R.
Beckwith, Kathryn L. Quirk, Lynn S. Birdsong and Cornelia M. Small is serving as
a Managing Director of the Investment Manager; the principal occupation of Rolf
Huppi is serving as an officer of Zurich; the principal occupation of Laurence
Cheng is serving as a senior partner of Capital Z Partners, an investment fund;
the principal occupation of Gunther Gose is serving as the Chief Financial
Officer of Zurich Financial Services; the principal occupation of William H.
Bolinder is serving as a member of the Group Executive Board of Zurich Financial
Services. Appendix 6 includes information regarding each Trustee and officer of
the Trust who is associated with Scudder Kemper.
The outstanding voting securities of the Investment Manager are held of
record 36.63% by Zurich Holding Company of America ("ZHCA"), a subsidiary of
Zurich; 32.85% by ZKI Holding Corp. ("ZKIH"), a subsidiary of Zurich; 20.86% by
Stephen R. Beckwith, Lynn S. Birdsong, Kathryn L. Quirk, Cornelia M. Small and
Edmond D. Villani, in their capacity as representatives (the "Management
Representatives") of the Investment Manager's management holders and retiree
holders pursuant to a Second Amended and Restated Security Holders Agreement
(the "Security Holders Agreement") among the Investment Manager, Zurich, ZHCA,
ZKIH, the Management Representatives, the management holders, the retiree
holders and Edmond D. Villani, as trustee of Scudder Kemper Investments, Inc.
Executive Defined Contribution Plan Trust (the "Plan Trust"); and 9.66% by the
Plan Trust. There are no outstanding non-voting securities of the Investment
Manager.
In connection with the Scudder-Zurich Transaction (described above),
pursuant to which Zurich acquired a two-thirds interest in Scudder for $866.7
million in cash in December, 1997, Daniel Pierce, a Trustee of the Trust, sold
85.4% of his holdings in Scudder to Zurich for cash.
Pursuant to the Security Holders Agreement (which was entered into in
connection with the Scudder-Zurich Transaction), the Board of Directors of the
Investment Manager consists of four directors designated by ZHCA and ZKIH and
three directors designated by Management Representatives.
- ------------------------------
* Mythenquai 2, Zurich, Switzerland
(#) 345 Park Avenue, New York, New York
(+) 1400 American Lane, Schaumburg, Illinois
18
<PAGE> 25
The Security Holders Agreement requires the approval of a majority of the
Scudder-designated directors for certain decisions, including changing the name
of Scudder Kemper, effecting an initial public offering before April 15, 2005,
causing Scudder Kemper to engage substantially in non-investment management and
related business, making material acquisitions or divestitures, making material
changes in Scudder Kemper's capital structure, dissolving or liquidating Scudder
Kemper, or entering into certain affiliated transactions with Zurich. The
Security Holders Agreement also provides for various put and call rights with
respect to Scudder Kemper stock held by persons who were employees of Scudder at
the time of the Scudder-Zurich Transaction, limitations on Zurich's ability to
purchase other asset management companies outside of Scudder Kemper, rights of
Zurich to repurchase Scudder Kemper stock upon termination of employment of
Scudder Kemper personnel, and registration rights for stock held by stockholders
of Scudder continuing after the Scudder-Zurich Transaction.
Directors, officers and employees of Scudder Kemper from time to time may
enter into transactions with various banks, including each Fund's custodian
bank. It is Scudder Kemper's opinion that the terms and conditions of those
transactions will not be influenced by existing or potential custodial or other
Fund relationships.
Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street, Kansas
City, Missouri 64105, is each Fund's transfer agent and dividend-paying agent.
IFTC has entered into an agreement with Kemper Investors Life Insurance Company
("KILICO") whereby KILICO provides certain record keeping services. Scudder Fund
Accounting Corporation ("SFAC"), a subsidiary of Scudder Kemper, computes net
asset value for each Fund. Currently, SFAC receives no fee for its services to
each Fund other than KGBCP, KIGIP, KDFSP and KDHRP; however, subject to Board
approval, at some time in the future, SFAC may seek payment for its services
from those Funds that currently do not pay it a fee for its services. No fees
were paid to SFAC by KGBCP, KIGIP, KDFSP or KDHRP during the year ended December
31, 1997, since those Funds had not commenced operations at that time. Kemper
Distributors, Inc. ("KDI"), 222 South Riverside Plaza, Chicago, Illinois 60606,
a subsidiary of Scudder Kemper, is the principal underwriter and distributor of
each Fund's shares and acts as agent of each Fund in the sale of its shares.
SFAC, KILICO and KDI will continue to provide fund accounting, record
keeping and distribution services, respectively, to the Funds, as described
above, under the current arrangements if the New Investment Management
Agreements are approved.
Exhibit B sets forth (as of each fund's last fiscal year end, unless
otherwise noted) the fees and other information regarding investment companies
advised by Scudder Kemper that have similar investment objectives to any of the
Funds. (See Appendix 4 for information regarding the management fee rate, net
assets and aggregate management fee paid for each Fund.)
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<PAGE> 26
BROKERAGE COMMISSIONS ON PORTFOLIO TRANSACTIONS
To the maximum extent feasible, Scudder Kemper or, where applicable, a
sub-adviser to a Fund places orders for portfolio transactions through Scudder
Investor Services, Inc. ("SIS"), Two International Place, Boston, Massachusetts
02110, which in turn places orders on behalf of the Funds with issuers,
underwriters or other brokers and dealers. SIS is a corporation registered as a
broker/dealer and a subsidiary of Scudder Kemper. SIS does not receive any
commissions, fees or other remuneration from the Funds for this service. In
selecting brokers and dealers with which to place portfolio transactions for a
Fund, Scudder Kemper (or a sub-adviser) may consider sales of shares of the
Funds and of other Kemper funds. When it can be done consistently with the
policy of obtaining the most favorable net results, Scudder Kemper may place
such orders with brokers and dealers who supply research, market and statistical
information to a Fund or to Scudder Kemper. Scudder Kemper (or a sub-advisor, as
applicable) is authorized when placing portfolio transactions for a Fund to pay
a brokerage commission (to the extent applicable) in excess of that which
another broker might charge for executing the same transaction on account of the
receipt of research, market or statistical information. Allocation of portfolio
transactions is supervised by Scudder Kemper.
THE BOARD MEMBERS OF THE TRUST RECOMMEND THAT THE SHAREHOLDERS OF EACH
FUND VOTE IN FAVOR OF THIS PROPOSAL 1.
PROPOSAL 2: APPROVAL OF NEW
SUB-ADVISORY AGREEMENT
(FOR SHAREHOLDERS OF KGIP, KIP, KDFSP AND KDHRP ONLY)
KGIP and KIP each uses the investment management services of Scudder
Investments (U.K.) Limited ("SIL"), a subsidiary of Scudder Kemper, with respect
to investments in foreign securities pursuant to the sub-advisory agreements
between Scudder Kemper and SIL described below.
Immediately prior to the consummation of the Scudder-Zurich Transaction,
Zurich Investment Management Limited ("ZIML"), which was an indirect subsidiary
of Zurich and an affiliate of Kemper, provided the sub-advisory services now
provided by SIL to each of KGIP and KIP, pursuant to sub-advisory agreements
dated December 1, 1996. Subsequent to the execution of the transaction agreement
relating to the Scudder-Zurich Transaction, Zurich agreed to cause ownership of
ZIML to be transferred by Zurich to Scudder Kemper (the "Transfer"). Prior to
the consummation of the Scudder-Zurich Transaction, shareholders of each of KGIP
and KIP approved two new sub-advisory agreements relating to their Fund: (a) a
sub-advisory agreement between Scudder Kemper and ZIML, to be dated as of the
date of the consummation of the Scudder-Zurich Transaction, (the "First
Sub-Advisory Agreement") to replace the Fund's current sub-advisory agreement
upon its termination as a result of the Scudder-Zurich Transaction, and (b) a
sub-advisory agreement between Scud-
20
<PAGE> 27
der Kemper and the successor to ZIML resulting from the Transfer (which is
SIL), to be dated as of the date of the Transfer, to replace the Fund's First
Sub-Advisory Agreement upon its termination as a result of the Transfer. The
Transfer occurred on May 21, 1998. The sub-advisory agreements between SIL and
Scudder Kemper applicable to each of KGIP and KIP that were in effect
immediately prior to the Transaction (the "Former SIL Sub-Advisory Agreements")
were dated May 21, 1998.
Each of KDFSP and KDHRP uses the investment management services of Dreman
Value Management, L.L.C. ("DVM") pursuant to the sub-advisory agreements between
Scudder Kemper and DVM described below. DVM was formed in April 1997 and is
controlled by David N. Dreman. DVM commenced providing sub-advisory services for
KDFSP and KDHRP when each Fund commenced operations, which occurred after the
consummation of the Scudder-Zurich Transaction, pursuant to a sub-advisory
agreement between Scudder Kemper and DVM, approved by the Board of the Trust on
March 18, 1998 and dated May 1, 1998 (the "Former DVM Sub-Advisory Agreements").
Each Former SIL Sub-Advisory Agreement and each Former DVM Sub-Advisory
Agreement provides that such agreement shall automatically terminate in the
event of the termination (due to assignment or otherwise) of the Fund's
currently effective investment management agreement. As discussed in Proposal 1,
consummation of the Transaction may be deemed to have constituted an
"assignment," as that term is defined in the 1940 Act, of each Fund's Former
Investment Management Agreement and may therefore have caused a termination of
each Former SIL Sub-Advisory Agreement and each Former DVM Sub-Advisory
Agreement. (See Proposal 1 for more information regarding each Former Investment
Management Agreement.) Accordingly, new sub-advisory agreements between SIL and
Scudder Kemper, with respect to each of KGIP and KIP (each a "New SIL
Sub-Advisory Agreement" and, together with the Former SIL Sub-Advisory
Agreements, the "SIL Sub-Advisory Agreements"), and between DVM and Scudder
Kemper, with respect to each of KDFSP and KDHRP (each a "New DVM Sub-Advisory
Agreement" and, together with the Former DVM Sub-Advisory Agreements, the "DVM
Sub-Advisory Agreements"), were approved by the Board members of the Trust and
are now being proposed for approval by shareholders of each of KGIP, KIP, KDFSP
and KDHRP, respectively.
As with the New Investment Management Agreements, prior to approval by
shareholders of each applicable New SIL Sub-Advisory Agreement or New DVM
Sub-Advisory Agreement, any payments otherwise due under such sub-advisory
agreements will be held in escrow subject to shareholder approval.
EACH NEW SIL SUB-ADVISORY AGREEMENT AND NEW DVM SUB-ADVISORY AGREEMENT IS
SUBSTANTIALLY IDENTICAL TO THE CORRESPONDING FORMER INVESTMENT MANAGEMENT
AGREEMENT, EXCEPT FOR THE DATES OF EXECUTION AND, IN THE CASE OF THE SIL SUB-
ADVISORY AGREEMENTS, TERMINATION. The material terms of each SIL Sub-
21
<PAGE> 28
Advisory Agreement and DVM Sub-Advisory Agreement are fully described under "The
SIL Sub-Advisory Agreements" and "The DVM Sub-Advisory Agreements,"
respectively, below. A form of New SIL Sub-Advisory Agreement is attached hereto
as Exhibit C. A form of New DVM Sub-Advisory Agreement is attached hereto as
Exhibit D.
The Board of the Trust met on July 17, 1998 and the Board, including a
majority of its Non-Interested Trustees, voted to approve the corresponding New
SIL Sub-Advisory Agreement or New DVM Sub-Advisory Agreement. In considering
whether to approve such agreements, the Board considered similar factors to
those it considered in approving the applicable Fund's New Investment Management
Agreement, to the extent applicable. (See Proposal 1 for more information
regarding the Board's Evaluation.)
DESCRIPTION OF THE SIL SUB-ADVISORY AGREEMENTS
Under the terms of each SIL Sub-Advisory Agreement, SIL renders investment
advisory and management services with regard to that portion of the Fund's
portfolio as may be allocated to SIL by Scudder Kemper from time to time for
management of foreign securities, including foreign currency transactions and
related investments. For its services, SIL receives from Scudder Kemper (not
from the Funds) a monthly fee at the annual rate of .35%, in the case of KIP,
and .30%, in the case of KGIP, on the portion of the average daily net assets
allocated by Scudder Kemper to SIL for management. Scudder Kemper (or its
predecessor) paid to SIL (or its predecessor) for KIP and KGIP for the period
from May 1, 1997 (inception) through December 31, 1997, $657,013 and $3,176,
respectively, for its sub-advisory services.
Each SIL Sub-Advisory Agreement provides that SIL 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 SIL Sub-Advisory Agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross negligence on the
part of SIL in the performance of its duties or from reckless disregard by SIL
of its obligations and duties under the SIL Sub-Advisory Agreement.
Each SIL 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 Trust and (b) by the
shareholders of the applicable Fund or the Board. Each SIL Sub-Advisory
Agreement may be terminated at any time for a Fund upon 60 days' notice by
Scudder Kemper, SIL or the applicable Board or by a majority vote of the
outstanding voting securities of the applicable Fund, and will terminate
automatically upon assignment or upon the termination of the Fund's investment
management agreement.
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<PAGE> 29
SIL
Scudder Investments (U.K.) Limited is located at 1 South Place, London EC2M
2ZS England. The names, addresses and principal occupations of the directors of
SIL are as follows:
<TABLE>
<S> <C>
Edmond D. Villani Director, SIL, and Chief
345 Park Avenue Executive Officer of Scudder
New York, NY 10154 Kemper
Stephen R. Beckwith Director, SIL, and Chief
345 Park Avenue Financial Officer of Scudder
New York, NY 10154 Kemper
Kathryn L. Quirk Director, SIL, and General
345 Park Avenue Counsel, Secretary and Chief
New York, NY 10154 Compliance Officer of Scudder
Kemper
Lynn S. Birdsong Director, SIL, and Managing
345 Park Avenue Director of Scudder Kemper
New York, NY 10154
Dennis H. Ferro Director, SIL, and Managing
1 South Place Director, Equities
London, UK EC2M 2ZS
Richard D. W. Haas, Director Director, SIL, and Head of
1 South Place Finance
London, UK EC2M 2ZS
Joon Yew Tan Director, SIL, Company
1 South Place Secretary and Head of
London, UK ECZM 225 Compliance
</TABLE>
In addition to acting as sub-adviser for KGIP and KIP, SIL also provides
sub-advisory services to Kemper Europe Fund ("KEUF"), Kemper Global Income Fund
("KGIF"), Kemper International Fund ("KIF") and Kemper Worldwide 2004 Fund
("KWF4"), and receives from Scudder Kemper for such services a monthly fee at
the annual rate of .35%, in the case of KIF, KEUF and KWF4, and .30%, in the
case of KGIF, on the portion of the average daily net assets allocated by
Scudder Kemper to SIL for management.
THE NEW SIL SUB-ADVISORY AGREEMENTS
The New SIL Sub-Advisory Agreement for each of KGIP and KIP, which is
currently in effect, is dated the date of the consummation of the Transaction,
which occurred on September 7, 1998. Each New SIL Sub-Advisory Agreement will be
in effect for an initial term ending on April 1, 1999, and may continue in
effect from year to year thereafter, but only as long as such continuance is
specially approved at least annually by the vote of a "majority of the
outstanding voting securities" of the applicable Fund, or the Board, including,
in either event, the vote of a majority of the Board's Trustees 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. At a meeting held on September 22, 1998,
the Board,
23
<PAGE> 30
including a majority of the Non-Interested Trustees, approved the continuance
of each New SIL Sub-Advisory Agreement through September 30, 1999. In the event
that shareholders of KGIP and KIP do not approve such Fund's New SIL
Sub-Advisory Agreement, it will terminate. In such event, the Board will take
such action as it deems to be in the best interests of the Fund and its
shareholders.
DIFFERENCES BETWEEN THE FORMER AND NEW SIL SUB-ADVISORY AGREEMENTS
The New SIL Sub-Advisory Agreements are substantially identical to the
Former SIL Sub-Advisory Agreements, except for the dates of execution and
termination.
DESCRIPTION OF THE DVM SUB-ADVISORY AGREEMENTS
Each DVM Sub-Advisory Agreement provides that DVM shall manage the
investment and reinvestment of the applicable Fund's assets in accordance with
the investment objectives, policies and limitations and subject to the
supervision of Scudder Kemper and the Board. In connection therewith, each DVM
Sub-Advisory Agreement provides that DVM will furnish related office facilities
and equipment and clerical, bookkeeping and administrative services for the
applicable Fund. Under each DVM Sub-Advisory Agreement, DVM agrees to assume and
pay all costs and expenses of performing its obligations under the agreement,
and Scudder Kemper agrees to pay to DVM a monthly fee at the annual rates
described in the form of New DVM Sub-Advisory Agreement attached hereto as
Exhibit D applied to the average daily net assets of the applicable Fund. Each
of KDFSP and KDHRP did not commence operations until May 1, 1998; therefore, no
information regarding fees paid is available for these Funds.
Each DVM Sub-Advisory Agreement may be terminated at any time without the
payment by the applicable Fund of any penalty, by the applicable Board or by
vote of a majority of the outstanding voting securities of the applicable Fund,
or by Scudder Kemper, in each case upon sixty (60) days' written notice; and it
automatically terminates in the event of its assignment or in the event of the
termination of the applicable Fund's investment management agreement. Scudder
Kemper also has the right to terminate each DVM Sub-Advisory Agreement upon
immediate notice if DVM becomes statutorily disqualified from performing its
duties under the DVM Sub-Advisory Agreement or otherwise is legally prohibited
from operating as an investment adviser. DVM may not terminate any DVM
Sub-Advisory Agreement prior to the third anniversary of the date of the
Agreement, and thereafter termination requires ninety (90) days' written notice.
Each DVM Sub-Advisory Agreement provides that DVM shall not be liable for
any error of judgment or of law or for any loss suffered by the Trust, or the
applicable Fund in connection with the matters to which the DVM Sub-Advisory
Agreement relates, except loss resulting from willful misfeasance, bad faith or
gross negligence on the part of DVM in the performance of its obligations and
duties under the DVM Sub-Advisory Agreement.
24
<PAGE> 31
DVM
Dreman Value Management, L.L.C., Ten Exchange Place, Suite 2101, Jersey
City, New Jersey, 07302, is controlled by David N. Dreman. Mr. Dreman owns 10%
of DVM's shares of beneficial interest but has 100% of the voting control.
Between 1% and 5% of the equity interest in DVM is held by certain other senior
executives listed below and the remaining 85% to 89% of the equity interest in
DVM is held by Cheryl Hershberg and Holly Dreman as trustees of an irrevocable
trust created under the laws of the State of New York, for the benefit of David
N. Dreman, Jr. and Meredith W. Dreman. The trust has no voting rights with
respect to directing or managing DVM other than the right to vote to dissolve
DVM or to amend its operating agreement. The names, addresses and principal
occupations of the principal executive officers of DVM are as follows:
<TABLE>
<S> <C>
David N. Dreman Chairman, DVM
Three Harding Road
Red Bank, NJ 07701
Joseph W. Sullivan Chief Executive Officer, DVM
7 Combes Drive
Manhasset, NY 11030
Nelson P. Woodard Managing Director, DVM
7 Navesink Court
Long Branch, NJ 07740
Theodore C. Dutcher Senior Vice President, DVM
9100 Vance Street
Westminster, CO 80022
Dorothy Silverman Senior Vice President, DVM
396 Brighton Avenue
Long Branch, NJ 07740
John R. Dorfman Senior Vice President, DVM
24 Burnside Road
Newton Highlands, MA 02161
Eric A. Lufkin Senior Vice President, DVM
19 Hill Road
Atlantic Highlands, NJ 07716
Kenneth Holz Vice President, DVM
1000 Central Avenue
Westfield, NJ 07090
Peter B. Seligman Vice President, DVM
9 Post Road
Rumson, NJ 07760
Joseph Geoghegan Vice President, DVM
173 Boyd Avenue
Jersey City, NJ 07304
</TABLE>
In addition to acting as sub-adviser for KDFSP and KDHRP, DVM also provides
sub-advisory services to Kemper-Dreman Financial Services Fund and Kemper-Dreman
High Return Equity Fund (each a "Portfolio"), each a series of Kemper
Global/International Series, Inc., and receives from Scudder Kemper for
25
<PAGE> 32
such services to each Portfolio a monthly fee at an equivalent rate to that
applicable to KDFSP and KDHRP.
THE NEW DVM SUB-ADVISORY AGREEMENTS
The New DVM Sub-Advisory Agreement for each of KDFSP and KDHRP, which is
currently in effect, is dated the date of the consummation of the Transaction,
which occurred on September 7, 1998. The New DVM Sub-Advisory Agreements will be
in effect until May 1, 2003, unless sooner terminated or not annually approved
as described below. Notwithstanding the foregoing, each New DVM Sub-Advisory
Agreement shall continue in effect through May 1, 2003, and year to year
thereafter, but only as long as such continuance is specifically approved at
least annually and in the manner required by the 1940 Act and the rules and
regulations thereunder with the first annual renewal to be coincident with the
next renewal of the applicable Fund's investment management agreement. Each New
DVM Sub-Advisory Agreement was last continued until September 30, 1999 by the
Board on September 22, 1998. In the event that shareholders of either of KDFSP
and KDHRP do not approve such Fund's New DVM Sub-Advisory Agreement, it will
terminate. In such event, the Board will take such action as it deems to be in
the best interests of the Fund and its shareholders.
DIFFERENCES BETWEEN THE FORMER AND NEW DVM SUB-ADVISORY AGREEMENTS
The New DVM Sub-Advisory Agreements are substantially identical to the
Former DVM Sub-Advisory Agreements, except for the dates of execution.
THE BOARD MEMBERS OF THE TRUST RECOMMEND THAT THE SHAREHOLDERS OF EACH
APPLICABLE FUND VOTE IN FAVOR OF THIS PROPOSAL 2.
PROPOSAL 3: APPROVAL OF THE MODIFICATION OR ELIMINATION OF
CERTAIN POLICIES AND THE ELIMINATION OF THE SHAREHOLDER
APPROVAL REQUIREMENT AS TO CERTAIN OTHER MATTERS
The 1940 Act requires an investment company to adopt policies governing
certain specified activities, which can be changed only by a shareholder vote.
Policies that cannot be changed or eliminated without a shareholder vote are
referred to in this Proxy Statement as "fundamental" policies. The purposes of
this Proposal are to eliminate the requirement of shareholder approval to change
policies except where required by the 1940 Act and to provide the maximum
permitted flexibility in those policies that do require shareholder approval.
Management has advised the Board that some of the Funds' fundamental policies
that are not required to be such under the 1940 Act were adopted in the past as
a result of now rescinded regulatory requirements and no longer serve any useful
purpose. Management believes that other fundamental policies, as well as the
classification of each Fund's investment objective(s) as fundamental, are
unnecessary because the provisions of the 1940 Act or federal tax law,
26
<PAGE> 33
together with the disclosure requirements of the federal securities laws,
provide adequate safeguards for a Fund and its shareholders. The Proposal is
described in more detail below.
This Proposal is sub-divided into the following three sections:
(1) Elimination of Shareholder Approval Requirement to Amend Investment
Objectives and Investment Policies. Certain of the Funds listed below currently
require shareholder approval to amend "investment objectives and policies." The
first section of this Proposal seeks shareholder approval of the elimination of
the shareholder approval requirement for amending (a) "investment objectives,"
and (b) "investment policies" which are not otherwise specifically identified as
fundamental. Eliminating the shareholder approval requirement for amending the
investment objective (or objectives) of a Fund is intended to enhance the Fund's
investment flexibility in the event of changing circumstances. Additionally,
management believes that currently it is not possible to determine precisely
which policies are fundamental on the basis of the language in the Funds'
Prospectuses and Statements of Additional Information, thus creating uncertainty
and restricting the Funds' investment flexibility and their ability to respond
to changing regulatory and industry conditions.
(2) Revision of Fundamental Policies Mandated by the 1940 Act. Each of the
fundamental policies proposed for revision relates to an activity that the 1940
Act requires be governed by a fundamental policy. Each proposed revision is, in
general, intended to provide the Funds' Board with the maximum flexibility
permitted under the 1940 Act, and to promote simplicity among the Funds'
policies.
(3) Elimination of Shareholder Approval Requirement to Change Other
Fundamental Policies. This Proposal seeks to eliminate certain policies that
are specifically designated as fundamental but which are not required to be
fundamental under the 1940 Act. The Board of the Funds anticipates adopting
certain of these policies as non-fundamental. Any policy that is not designated
as fundamental can be modified or eliminated by the Board, and, as indicated
below, management intends to recommend to the Board the elimination of several
of them as being inappropriate or unnecessary under current conditions.
Each proposed policy is identified in bold-type below together with a list
of Funds whose shareholders' vote is required.
Each Fund's current fundamental policies are set forth in Exhibit E.
Changes in fundamental policies that are approved by shareholders, as well as
changes in non-fundamental policies that are adopted by the Board, will be
reflected in each Fund's Prospectus and other disclosure documents. Any change
in the method of operation of a Fund will require prior Board approval. Except
as specifically indicated below, the Board does not presently intend to change
the investment objectives or the investment policies of each Fund.
27
<PAGE> 34
Approval of each item of this Proposal with respect to any Fund requires
the affirmative vote of a majority of the outstanding voting securities, as
defined above, of that Fund. If the shareholders of any Fund fail to approve the
proposed modification or elimination of policies or the elimination of the
shareholder approval requirement as to a matter, the current policy or approval
requirement will remain in effect.
ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO AMEND INVESTMENT OBJECTIVES
AND INVESTMENT POLICIES
Investment Objectives
PROPOSAL 3.0: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THE
INVESTMENT OBJECTIVE(S) OF THAT FUND WILL NOT BE CLASSIFIED AS FUNDAMENTAL.
This proposal applies to all Funds.
Management believes that leaving the power to modify investment objectives
up to the discretion of the Board would strengthen each Fund's ability to
respond to changing circumstances. The Board does not presently intend to modify
any Fund's investment objective, and would disclose any changes to applicable
shareholders by amending the particular Fund's Prospectus and Statement of
Additional Information.
Investment Policies
PROPOSAL 3.1: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THE
"INVESTMENT POLICIES" OF THAT FUND WILL NOT BE CLASSIFIED AS FUNDAMENTAL EXCEPT
AS OTHERWISE PROVIDED IN THIS PROXY STATEMENT.
This proposal applies to:
KBCP
KGSP
KH10P
KIP
KSCGP
KVGP
KCVP
KGP
KH20P
KIGBP
KSCVP
KGIP
KHYP
KH5P
KMMP
KTRP
This proposal is intended to provide the Funds with clarity of disclosure
and the investment flexibility necessary to respond to changing circumstances by
eliminating the shareholder approval requirement for amending "investment
policies" which are not specifically identified as fundamental. The Funds'
Prospectuses currently contain a statement that characterizes the "investment
policies" of a Fund as fundamental. Management believes that this current
statement is overbroad and, therefore, creates difficulty for portfolio managers
in operating a Fund and for current or potential shareholders of a Fund in
determining which policies of the Fund are fundamental. The current statement
also unnecessarily restricts a Fund's flexibility and may make it more difficult
to respond to changing conditions. Management believes that removing the funda-
28
<PAGE> 35
mental characterization of all policies not otherwise specifically identified as
fundamental is consistent with industry standards and would allow the Board to
modify a Fund's investment policies in light of changes in the investment
management industry, market conditions and the regulatory environment, but only
consistent with applicable law, the Fund's investment objective and its
clearly-identified fundamental policies.
REVISION OF FUNDAMENTAL POLICIES MANDATED BY THE 1940 ACT
Diversification
PROPOSAL 3.2(a): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND,
THAT FUND WILL REMAIN A "DIVERSIFIED" FUND UNDER THE 1940 ACT, BUT WILL NOT BE
SUBJECT TO ADDITIONAL REQUIREMENTS THAT ARE MORE RESTRICTIVE THAN THE 1940 ACT.
This proposal applies to all Funds (except for KGIP; see Proposal 3.2(b)).
Each Fund is currently classified as a diversified series of an open-end
investment company. Under the 1940 Act, a "diversified" Fund may not, with
respect to 75% of the value of its total assets, invest more than 5% of the
value of its total assets in securities issued by any one issuer or purchase
more than 10% of the outstanding voting securities of any one issuer, except in
each case U.S. Government securities or securities issued by other investment
companies. Currently, each Fund except KGBCP, KIGIP and KDFSP has adopted
additional diversification policies. Each of KCVP and KSCVP, with respect to 75%
of the value of its total assets, may not invest more than 5% of the value of
its total assets in the securities of any one issuer, and with respect to 100%
of the value of its total assets, may not purchase more than 10% of the voting
securities of any one issuer. Each of KHYP and KDHRP with respect to 75% of the
value of its total assets, may not purchase more than 10% of the voting
securities of any one issuer or invest more than 5% of the value of its total
assets in the securities of any one issuer. Each of the Fund's policies include
an exception for U.S. Government securities and the policy for KHYP also
includes an exception for investments in a master fund within a master/feeder
fund structure.
Under their current diversification policies, KBCP, KGSP, KGP, KH10P,
KH20P, KH5P, KIP, KIGBP, KMMP, KSCGP, KTRP and KVGP each may not invest more
than 5% of its total assets in the securities of any one issuer. All Funds
contain an exception for U.S. Government securities. Each of these Funds also
contains a separate policy prohibiting the purchase of more than 10% of the
voting securities of any one issuer. Accordingly, the elimination of the
additional diversification policies for a Fund means that the Fund must comply
with only the 1940 Act diversification requirements. As a result, the
elimination of the additional diversification policies that apply to 75% of the
value of a Fund's total assets will not represent a substantive change to that
Fund's diversification requirements. However, the elimination of the additional
diversification policies that apply to 100% of the value of a Fund's total
assets will cause that Fund to have less restrictive diversification
requirements.
29
<PAGE> 36
PROPOSAL 3.2(B): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF THE FUND,
THE FUND WILL REMAIN A "NON-DIVERSIFIED" FUND UNDER THE 1940 ACT BUT WILL
ELIMINATE AS FUNDAMENTAL THE CURRENT DIVERSIFICATION POLICIES.
This proposal applies to KGIP.
The Fund has elected to be classified as a non-diversified series of an
open-end investment company. Consequently, the Fund has no diversification
requirements under the 1940 Act. However, the Fund currently has diversification
policies that restrict it, with respect to 50% of the value of its total assets,
from investing more than 5% of the value of its total assets in the securities
of any one issuer, and with respect to the other 50% of its total assets, from
investing more than 25% of the value of its total assets in the securities of
any one issuer. Additionally, with respect to 100% of its assets, the Fund may
not purchase more than 10% of the securities of any issuer. These
diversification policies reflect the requirements of the Internal Revenue Code
of 1986, as amended, for a fund to qualify for the favorable tax status as a
"regulated investment company." Whether or not this proposal is approved by
shareholders, the Fund intends to continue to meet these requirements.
Borrowing
PROPOSAL 3.3: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT BORROW MONEY, EXCEPT AS PERMITTED UNDER THE INVESTMENT COMPANY ACT
OF 1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY
HAVING JURISDICTION, FROM TIME TO TIME.
This proposal applies to all Funds (except for KGBCP, KIGIP, and KDFSP, which
currently have the fundamental policy set forth immediately above).
The current borrowing policy of each of KBCP, KCVP, KGIP, KGSP, KGP, KHYP,
KH10P, KH20P, KH5P, KIP, KIGBP, KMMP, KSCGP, KSCVP, KTRP, KVGP and KDHRP
prohibits borrowing money, except as a temporary measure for extraordinary or
emergency purposes, in which case each Fund may borrow up to one-third of the
value of its total assets; except for KDHRP which may not borrow more than 10%
of the value of its total assets and KIP which may not borrow more than 5% of
the value of its total assets. Additionally, all Funds except for KIP and KDHRP
are restricted from borrowing for leverage or from making investments while
borrowings are outstanding.
The proposed policy would permit each Fund to engage in borrowing in a
manner and to the full extent permitted by applicable law. The 1940 Act requires
borrowings to have 300% asset coverage, which means, in effect, that a Fund
would be permitted to borrow up to an amount equal to 50% of its total assets
under the proposed borrowing policy. Additionally, under the proposed policy,
each Fund would not be limited to borrowing for temporary or emergency purposes,
could borrow for leverage, and could purchase securities for investment while
borrowings are outstanding. However, the Board has no current intention of
authorizing any of these practices. If the Board authorized a
30
<PAGE> 37
Fund to borrow for leverage, such borrowings would increase the Fund's
volatility and the risk of loss in a declining market.
Senior Securities
PROPOSAL 3.4: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT ISSUE SENIOR SECURITIES, EXCEPT AS PERMITTED UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY
AUTHORITY HAVING JURISDICTION, FROM TIME TO TIME.
This proposal applies to all Funds (except for KGBCP, KIGIP and KDFSP, which
currently have the fundamental policy set forth immediately above).
The current policy of each Fund, other than KDHRP, prohibits the issuance
of senior securities (i.e., securities which are obligations or instruments
evidencing indebtedness) except as permitted under the 1940 Act. The proposed
policy rewords the current policies without making any material changes. KDHRP
contains an absolute prohibition against the issuance of senior securities. The
proposed policy would permit KDHRP to issue senior securities to the extent
permitted by the 1940 Act.
Concentration
PROPOSAL 3.5(A): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND,
THAT FUND MAY NOT CONCENTRATE ITS INVESTMENTS IN A PARTICULAR INDUSTRY, AS THAT
TERM IS USED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND AS
INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY HAVING JURISDICTION, FROM TIME
TO TIME.
This proposal applies to all Funds (except for KGBCP, KIGIP and KDFSP, which
currently have the fundamental policy set forth immediately above, and except
for KMMP (see Proposal 3.5(b))).
While the 1940 Act does not define what constitutes "concentration" in an
industry, the Commission takes the position that investment of more than 25% of
a fund's assets in an industry constitutes concentration. If a fund concentrates
in an industry, it must at all times have more than 25% of its assets invested
in that industry, and if its policy is not to concentrate, as is the case with
each of the Funds, it may not invest more than 25% of its assets in the
applicable industry, unless, in either case, the fund discloses the specific
conditions under which it will change from concentrating to not concentrating or
vice versa.
Each Fund's current policy in effect prohibits the purchase of securities
if it would result in more than 25% of the Fund's total assets being invested in
the same industry. Some policies contain an exception for U.S. Government
securities. In some cases, what constitutes an industry for the purposes of this
restriction is included in the policy itself. A fund is permitted to adopt
reasonable definitions of what constitutes an industry, or it may use standard
classifications recognized by the Commission, or some combination thereof.
Because a fund
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<PAGE> 38
may create its own reasonable industry classifications, management believes that
it is not necessary to include such matters in the fundamental policy of a Fund.
PROPOSAL 3.5(B): IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF THE FUND,
THE FUND WILL NOT CONCENTRATE ITS INVESTMENTS IN A PARTICULAR INDUSTRY, AS THAT
TERM IS USED IN THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, AND AS
INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY HAVING JURISDICTION, FROM TIME
TO TIME, EXCEPT THAT THE FUND INTENDS TO INVEST MORE THAN 25% OF ITS NET ASSETS
IN INSTRUMENTS ISSUED BY BANKS.
This proposal applies to KMMP.
The Fund currently concentrates more than 25% of its net assets in
instruments issued by banks. The proposed concentration policy has been re-
worded without making any material changes.
Underwriting of Securities
PROPOSAL 3.6: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT ENGAGE IN THE BUSINESS OF UNDERWRITING SECURITIES ISSUED BY OTHERS,
EXCEPT TO THE EXTENT THAT A FUND MAY BE DEEMED TO BE AN UNDERWRITER IN
CONNECTION WITH THE DISPOSITION OF PORTFOLIO SECURITIES.
This proposal applies to all Funds.
The proposed underwriting policy has been reworded without making any
material changes.
Investment In Real Estate
PROPOSAL 3.7: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT PURCHASE OR SELL REAL ESTATE, WHICH TERM DOES NOT INCLUDE
SECURITIES OF COMPANIES WHICH DEAL IN REAL ESTATE OR MORTGAGES OR INVESTMENTS
SECURED BY REAL ESTATE OR INTERESTS THEREIN, EXCEPT THAT THE FUND RESERVES
FREEDOM OF ACTION TO HOLD AND TO SELL REAL ESTATE ACQUIRED AS A RESULT OF THE
FUND'S OWNERSHIP OF SECURITIES.
This proposal applies to all Funds.
The proposed real estate policy rewords the current policies without making
any material changes. The current policies of KBCP and KGIP also prohibit
investment in real estate limited partnerships. Additionally, the current policy
of KDHRP prohibits investment in mortgage loans. Management intends to recommend
to the Board the adoption of each of the foregoing policies as non-fundamental
policies.
Purchase of Commodities
PROPOSAL 3.8: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT PURCHASE PHYSICAL COMMODITIES OR CONTRACTS RELATING TO PHYSICAL
COMMODITIES.
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This proposal applies to all Funds (except KGBCP, KIGIP and KDFSP, which
currently have the fundamental policy set forth immediately above).
The Funds' current policies prohibit the purchase or sale of commodities or
commodity contracts. These policies may contain exceptions for financial futures
contracts and options on such contracts, foreign currency transactions, and, in
the case of KDHRP, investments in oil, gas or mineral exploration or development
programs. Under the proposed policy, each Fund would be prohibited from
purchasing only physical commodities or contracts relating to physical
commodities.
Lending
PROPOSAL 3.9: IF THIS PROPOSAL IS APPROVED BY THE SHAREHOLDERS OF A FUND, THAT
FUND MAY NOT MAKE LOANS EXCEPT AS PERMITTED UNDER THE INVESTMENT COMPANY ACT OF
1940, AS AMENDED, AND AS INTERPRETED OR MODIFIED BY REGULATORY AUTHORITY HAVING
JURISDICTION, FROM TIME TO TIME.
This proposal applies to all Funds.
Each Fund's current lending policy prohibits making loans to others. The
current policies of KBCP, KGBCP, KGIP, KGSP, KGP, KHYP, KIGIP, KMMP, KTRP and
KDFSP permit each Fund to make loans of portfolio securities, enter into
repurchase agreements and purchase debt obligations. The current policy of KDHRP
only excepts from the lending prohibition securities lending and repurchase
agreements. KCVP, KH10P, KH20P, KH5P, KIP, KIGBP, KSCGP, KSCVP and KVGP may also
make time or demand deposits with banks. The proposed policy, unlike the current
policies, does not specify the particular types of lending in which each Fund is
permitted to engage; instead, the proposed policy permits each Fund to lend in a
manner and to an extent permitted by applicable law. The proposed change would,
therefore, permit each Fund, subject to the receipt of any necessary regulatory
approval and Board authorization, to enter into lending arrangements, including
lending agreements under which the Funds advised by Scudder Kemper could for
temporary purposes lend money directly to and borrow money directly from each
other through a credit facility. Each of the Funds believes that the flexibility
provided by this policy change could possibly reduce the Fund's borrowing costs
and enhance its ability to earn higher rates of interest on short-term lendings
in the event that the Board determines that such arrangements are warranted in
light of the Fund's particular circumstances.
ELIMINATION OF SHAREHOLDER APPROVAL REQUIREMENT TO CHANGE OTHER FUNDAMENTAL
POLICIES
Certain of the policies listed below (Margin Purchases and Short Sales,
Purchase of Securities of Related Issuers, Pledging of Assets, Purchases of
Securities, Restricted and Illiquid Securities, Investment in Issuers with Short
Histories, and Investment in Investment Companies) were initially adopted by
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the Funds due to state securities regulatory policies that are no longer in
effect. Others reflected industry conditions at the time. Management believes
that each of these policies should be eliminated as a fundamental policy in the
interest of simplicity and flexibility. Except as otherwise stated, if
shareholders approve the elimination of these policies as fundamental,
management will recommend to the Board members that they eliminate these
policies entirely as being unnecessary.
Margin Purchases and Short Sales
PROPOSAL 3.10: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON MARGIN PURCHASES AND SHORT
SALES.
This proposal applies to all Funds (except for KGBCP, KIGIP and KDFSP).
Each Fund is currently prohibited from making margin purchases or short
sales, except to obtain short-term credits necessary for clearance of
transactions, and/or in connection with financial futures and options
transactions. If elimination of this restriction is approved by shareholders,
each Fund's potential use of margin transactions beyond transactions in futures
and options and for the clearance of purchases and sales of securities,
including the use of margin in ordinary securities transactions, would be
generally limited by the current position taken by the staff of the SEC that
margin transactions with respect to securities are prohibited under Section 18
of the 1940 Act because they create senior securities. "Margin transactions"
involve the purchase of securities with money borrowed from a broker, with cash
or eligible securities being used as collateral against the loan. Each Fund's
ability to engage in margin transactions is also limited by its borrowing
policies, which permit a Fund to borrow money only as permitted by applicable
law.
Purchase of Securities of Related Issuers
PROPOSAL 3.11: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF THE FUND, THE
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PURCHASE OF SECURITIES OF
RELATED ISSUERS.
This proposal applies to KMMP.
The current policy of the Fund prohibits the purchase of securities of
issuers if any officer, director, trustee or security holder of the Fund or
Scudder Kemper beneficially owns more than 1/2 of one percent of the securities
of such issuer or own collectively more than 5% of the securities of such
issuer. Transactions between the Fund and an affiliated person of the Fund are
currently regulated under the 1940 Act.
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<PAGE> 41
Pledging of Assets
PROPOSAL 3.12: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PLEDGING OF ASSETS.
This proposal applies to KBCP, KGIP, KIP and KDHRP.
Each Fund is currently prohibited from pledging, mortgaging or
hypothecating assets, except in order to secure borrowings. KBCP and KGIP each
may pledge securities in amounts not exceeding 15% of its total assets. KIP may
pledge securities in amounts not exceeding the amount of the borrowing.
KDHRP may pledge securities in amounts not in excess of the lesser of the
amount borrowed or 10% of total assets.
Purchases of Securities
PROPOSAL 3.13: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDER OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PURCHASE OF A SPECIFIED
PERCENTAGE OF AN ISSUER'S SECURITIES.
This proposal applies to all Funds (except for KGBCP, KHYP, KIGIP, KDFSP and
KDHRP).
Each Fund is prohibited with respect to 100% of its assets from purchasing
more than 10% of the securities of a single issuer. Additionally, each Fund
(except for KGIP) is a "diversified" fund and is therefore limited to
purchasing, with respect to 75% of its assets, not more than 10% of the voting
securities of a single issuer.
Purchases of Options
PROPOSAL 3.14: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON PURCHASES OF OPTIONS.
This proposal applies to KBCP, KGIP, KGP, KHYP, KH10P, KH20P, KH5P, KIP, KIGBP,
KMMP, KSCGP and KTRP.
All Funds, except for KBCP and KMMP, are prohibited from writing or selling
options on more than 25% of a Fund's net assets and are restricted from
investing more than 5% of the Fund's net assets on premiums on options but may
buy or sell options on financial contracts. KBCP is prohibited from writing or
selling options, and from purchasing options in excess of 5% of net assets but
may buy or sell options on financial futures contracts. KMMP contains absolute
restrictions on options transactions.
Restricted and Illiquid Securities
PROPOSAL 3.15: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF THE FUND, THE
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON THE PURCHASE OF RESTRICTED AND
ILLIQUID SECURITIES.
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<PAGE> 42
This proposal applies to KMMP.
The Fund is currently prohibited from entering into repurchase agreements
or purchasing securities if, as a result, more than 5% of the Fund's total
assets would be invested in securities restricted as to disposition under the
federal securities laws, or if more than 10% of the Fund's total assets would be
invested in repurchase agreements. Under the 1940 Act and applicable
interpretations of the SEC, the Fund is currently prohibited from investing more
than 5% of its total assets in illiquid securities, including restricted
securities which are deemed illiquid.
Investment in Mineral Exploration
PROPOSAL 3.16: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF THE FUND, THE
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT IN MINERAL
EXPLORATION PROGRAMS.
This proposal applies to KDHRP.
The Fund is currently prohibited from investing in oil, gas or other
mineral exploration or development programs, although it may invest in the
securities of issuers which invest in or sponsor such programs.
Investment in Issuers With Short Histories
PROPOSAL 3.17: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF THE FUND, THE
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT IN ISSUERS WITH SHORT
HISTORIES.
The proposal applies to KMMP.
The Fund is currently prohibited from investing more than 5% of its total
assets in securities of issuers which, with their predecessors, have a record of
less than three years of continuous operation.
Investment in other Investment Companies
PROPOSAL 3.18: IF THE PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF A FUND, THAT
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT IN OTHER INVESTMENT
COMPANIES.
This proposal applies to KGSP, KGP, KHYP, KIP, KMMP and KTRP.
The Funds are currently prohibited from purchasing securities of other
investment companies, except in connection with a merger, consolidation,
reorganization or acquisition of assets. The 1940 Act limits a Fund's ability to
invest in other investment companies.
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<PAGE> 43
Investment other than in Accordance with Objectives and Policies
PROPOSAL 3.19: IF THIS PROPOSAL IS ADOPTED BY THE SHAREHOLDERS OF THE FUND, THE
FUND WILL NOT HAVE A FUNDAMENTAL RESTRICTION ON INVESTMENT OTHER THAN IN
ACCORDANCE WITH ITS OBJECTIVES AND POLICIES.
This proposal applies to KMMP.
The Fund is currently prohibited from purchasing securities or from the
making of investments other than in accordance with its investment objectives
and policies. Management believes that this policy is not meaningful.
THE BOARD MEMBERS OF THE TRUST RECOMMEND THAT THE
SHAREHOLDERS OF EACH FUND VOTE IN FAVOR OF THIS PROPOSAL 3.
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<PAGE> 44
ADDITIONAL INFORMATION
GENERAL
The cost of preparing, printing and mailing the enclosed proxy card and
Proxy Statement and all other costs incurred in connection with the solicitation
of proxies, including any additional solicitation made by letter, telephone or
telegraph, will be paid by Zurich or its affiliates. In addition to solicitation
by mail, certain officers and representatives of the Trust, officers and
employees of Scudder Kemper and certain financial services firms and their
representatives, who will receive no extra compensation for their services, may
solicit proxies by telephone, telegram or personally.
Shareholder Communications Corporation ("SCC") has been engaged to assist
in the solicitation of proxies. As the Special Meeting date approaches, certain
shareholders of each Fund may receive a telephone call from a representative of
SCC if their votes have not yet been received. Authorization to permit SCC to
execute proxies may be obtained by telephonic or electronically transmitted
instructions from shareholders of each Fund. Proxies that are obtained
telephonically will be recorded in accordance with the procedures set forth
below. The Trustees believe that these procedures are reasonably designed to
ensure that the identity of the shareholder casting the vote is accurately
determined and that the voting instructions of the shareholder are accurately
determined.
In all cases where a telephonic proxy is solicited, the SCC representative
is required to ask for each shareholder's full name, address, social security or
employer identification number, title (if the shareholder is authorized to act
on behalf of an entity, such as a corporation), and the number of shares owned,
and to confirm that the shareholder has received the proxy materials in the
mail. If the information solicited agrees with the information provided to SCC,
then the SCC representative has the responsibility to explain the process, read
the Proposals on the proxy card, and ask for the shareholder's instructions on
the Proposals. The SCC representative, although he or she is permitted to answer
questions about the process, is not permitted to recommend to the shareholder
how to vote, other than to read any recommendation set forth in the Proxy
Statement. SCC will record the shareholder's instructions on the card. Within 72
hours, the shareholder will be sent a letter or mailgram to confirm his or her
vote and asking the shareholder to call SCC immediately if his or her
instructions are not correctly reflected in the confirmation.
If a shareholder wishes to participate in the Special Meeting, but does not
wish to give a proxy by telephone, the shareholder may still submit the proxy
card originally sent with the Proxy Statement or attend in person. Should
shareholders require additional information regarding the proxy or replacement
proxy cards, they may call the telephone number printed on the stub of their
proxy card (or, for contract holders, their voting instruction card). Any proxy
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<PAGE> 45
given by a shareholder, whether in writing or by telephone, is revocable until
voted at the Special Meeting.
PROPOSALS OF SHAREHOLDERS
Shareholders wishing to submit proposals for inclusion in a proxy statement
for a shareholder meeting subsequent to the Special Meeting, if any, should send
their written proposals to the Secretary of the Trust, c/o Scudder Kemper
Investments, Inc., at 222 South Riverside Plaza, Chicago, Illinois 60606, within
a reasonable time before the solicitation of proxies for such meeting. The
timely submission of a proposal does not guarantee its inclusion.
OTHER MATTERS TO COME BEFORE THE SPECIAL MEETING
No Board member is aware of any matters that will be presented for action
at the Special Meeting other than the matters set forth herein. Should any other
matters requiring a vote of shareholders arise, the proxy in the accompanying
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any such other matters in accordance with their best judgment in the interest of
the Trust and/or each Fund.
PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY CARD(S) PROMPTLY. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
By order of the Board of Trustees,
/s/ Philip J. Collora
Philip J. Collora
Secretary
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<PAGE> 46
EXHIBIT A
FORM OF NEW
INVESTMENT MANAGEMENT AGREEMENT
INVESTORS FUND SERIES
222 SOUTH RIVERSIDE PLAZA
CHICAGO, ILLINOIS 60606
SEPTEMBER 7, 1998
Scudder Kemper Investments, Inc.
345 Park Avenue
New York, New York 10154
INVESTMENT MANAGEMENT AGREEMENT
[NAME OF FUND]
LADIES AND GENTLEMEN:
INVESTORS FUND SERIES (the "Trust") has been established as a Massachusetts
business trust to engage in the business of an investment company. Pursuant to
the Trust's Declaration of Trust, as amended from time-to-time (the
"Declaration"), the Board of Trustees is authorized to issue the Trust's shares
of beneficial interest (the "Shares"), in separate series, or funds. The Board
of Trustees has authorized [name of Fund] (the "Fund"). Series may be abolished
and dissolved, and additional series established, from time to time by action of
the Trustees.
The Trust, on behalf of the Fund, has selected you to act as the investment
manager of the Fund and to provide certain other services, as more fully set
forth below, and you have indicated that you are willing to act as such
investment manager and to perform such services under the terms and conditions
hereinafter set forth. Accordingly, the Trust on behalf of the Fund agrees with
you as follows:
1. Delivery of Documents. The Trust engages in the business of
investing and reinvesting the assets of the Fund in the manner and in
accordance with the investment objectives, policies and restrictions
specified in the currently effective Prospectus (the "Prospectus") and
Statement of Additional Information (the "SAI") relating to the Fund
included in the Trust's Registration Statement on Form N-1A, as amended
from time to time, (the "Registration Statement") filed by the Trust under
the Investment Company Act of 1940, as amended, (the "1940 Act") and the
Securities Act of 1933, as amended. Copies of the documents referred to in
the preceding sentence have been furnished to you by the Trust. The Trust
has also furnished you with copies properly certified or authenticated of
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each of the following additional documents related to the Trust and the
Fund:
(a) The Declaration, as amended to date.
(b) By-Laws of the Trust as in effect on the date hereof (the "By-
Laws").
(c) Resolutions of the Trustees of the Trust and the shareholders
of the Fund selecting you as investment manager and approving the form
of this Agreement.
(d) Establishment and Designation of Series of Shares of Beneficial
Interest relating to the Fund, as applicable.
The Trust will furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements, if any, to
the foregoing, including the Prospectus, the SAI and the Registration
Statement.
2. Portfolio Management Services. As manager of the assets of the
Fund, you shall provide continuing investment management of the assets of
the Fund in accordance with the investment objectives, policies and
restrictions set forth in the Prospectus and SAI; the applicable provisions
of the 1940 Act and the Internal Revenue Code of 1986, as amended, (the
"Code") relating to regulated investment companies and all rules and
regulations thereunder; and all other applicable federal and state laws and
regulations of which you have knowledge; subject always to policies and
instructions adopted by the Trust's Board of Trustees. In connection
therewith, you shall use reasonable efforts to manage the Fund so that it
will qualify as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder. The Fund shall have the benefit of
the investment analysis and research, the review of current economic
conditions and trends and the consideration of long-range investment policy
generally available to your investment advisory clients. In managing the
Fund in accordance with the requirements set forth in this section 2, you
shall be entitled to receive and act upon advice of counsel to the Trust.
You shall also make available to the Trust promptly upon request all of the
Fund's investment records and ledgers as are necessary to assist the Trust
in complying with the requirements of the 1940 Act and other applicable
laws. To the extent required by law, you shall furnish to regulatory
authorities having the requisite authority any information or reports in
connection with the services provided pursuant to this Agreement which may
be requested in order to ascertain whether the operations of the Trust are
being conducted in a manner consistent with applicable laws and
regulations.
You shall determine the securities, instruments, investments,
currencies, repurchase agreements, futures, options and other contracts
relating to investments to be purchased, sold or entered into by the Fund
and place
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orders with broker-dealers, foreign currency dealers, futures commission
merchants or others pursuant to your determinations and all in accordance
with Fund policies as expressed in the Registration Statement. You shall
determine what portion of the Fund's portfolio shall be invested in
securities and other assets and what portion, if any, should be held
uninvested.
You shall furnish to the Trust's Board of Trustees periodic reports on
the investment performance of the Fund and on the performance of your
obligations pursuant to this Agreement, and you shall supply such
additional reports and information as the Trust's officers or Board of
Trustees shall reasonably request.
3. Administrative Services. In addition to the portfolio management
services specified above in section 2, you shall furnish at your expense
for the use of the Fund such office space and facilities in the United
States as the Fund may require for its reasonable needs, and you (or one or
more of your affiliates designated by you) shall render to the Trust
administrative services on behalf of the Fund necessary for operating as an
open end investment company and not provided by persons not parties to this
Agreement including, but not limited to, preparing reports to and meeting
materials for the Trust's Board of Trustees and reports and notices to Fund
shareholders; supervising, negotiating contractual arrangements with, to
the extent appropriate, and monitoring the performance of, accounting
agents, custodians, depositories, transfer agents and pricing agents,
accountants, attorneys, printers, underwriters, brokers and dealers,
insurers and other persons in any capacity deemed to be necessary or
desirable to Fund operations; preparing and making filings with the
Securities and Exchange Commission (the "SEC") and other regulatory and
self-regulatory organizations, including, but not limited to, preliminary
and definitive proxy materials, post-effective amendments to the
Registration Statement, semi-annual reports on Form N-SAR and notices
pursuant to Rule 24f-2 under the 1940 Act; overseeing the tabulation of
proxies by the Fund's transfer agent; assisting in the preparation and
filing of the Fund's federal, state and local tax returns; preparing and
filing the Fund's federal excise tax return pursuant to Section 4982 of the
Code; providing assistance with investor and public relations matters;
monitoring the valuation of portfolio securities and the calculation of net
asset value; monitoring the registration of Shares of the Fund under
applicable federal and state securities laws; maintaining or causing to be
maintained for the Fund all books, records and reports and any other
information required under the 1940 Act, to the extent that such books,
records and reports and other information are not maintained by the Fund's
custodian or other agents of the Fund; assisting in establishing the
accounting policies of the Fund; assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting
with the Fund's independent accountants, legal counsel and the Fund's other
agents as necessary in connection therewith; establishing and monitoring
the Fund's operating expense budgets; reviewing the Fund's bills;
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<PAGE> 49
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 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
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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) __________ ; over (b) any compensation waived by you
from time to time (as more fully described below). You shall be entitled to
receive during any month such interim payments of your fee hereunder as you
shall request, provided that no such payment shall exceed 75 percent of the
amount of your fee then accrued on the books of the Fund and unpaid.
The "average daily net assets" of the Fund shall mean the average of
the values placed on the Fund's net assets as of 4:00 p.m. (New York time)
on each day on which the net asset value of the Fund is determined
consistent with the provisions of Rule 22c-1 under the 1940 Act or, if the
Fund lawfully determines the value of its net assets as of some other time
on each business day, as of such time. The value of the net assets of the
Fund shall always be determined pursuant to the applicable provisions of
the Declaration and the Registration Statement. If the determination of net
asset value does not take place for any particular day, then for the
purposes of this section 5, the value of the net assets of the Fund as last
determined shall
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be deemed to be the value of its net assets as of 4:00 p.m. (New York
time), or as of such other time as the value of the net assets of the
Fund's portfolio may be lawfully determined on that day. If the Fund
determines the value of the net assets of its portfolio more than once on
any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of
this section 5.
You may waive all or a portion of your fees provided for hereunder and
such waiver shall be treated as a reduction in purchase price of your
services. You shall be contractually bound hereunder by the terms of any
publicly announced waiver of your fee, or any limitation of the Fund's
expenses, as if such waiver or limitation were fully set forth herein.
6. Avoidance of Inconsistent Position; Services Not Exclusive. In
connection with purchases or sales of portfolio securities and other
investments for the account of the Fund, neither you nor any of your
directors, officers or employees shall act as a principal or agent or
receive any commission. You or your agent shall arrange for the placing of
all orders for the purchase and sale of portfolio securities and other
investments for the Fund's account with brokers or dealers selected by you
in accordance with Fund policies as expressed in the Registration
Statement. If any occasion should arise in which you give any advice to
clients of yours concerning the Shares of the Fund, you shall act solely as
investment counsel for such clients and not in any way on behalf of the
Fund.
Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and services to others. In acting under this Agreement,
you shall be an independent contractor and not an agent of the Trust.
Whenever the Fund and one or more other accounts or investment companies
advised by you have available funds for investment, investments suitable
and appropriate for each shall be allocated in accordance with procedures
believed by you to be equitable to each entity. Similarly, opportunities to
sell securities shall be allocated in a manner believed by you to be
equitable. The Fund recognizes that in some cases this procedure may
adversely affect the size of the position that may be acquired or disposed
of for the Fund.
7. Limitation of Liability of Manager. As an inducement to your
undertaking to render services pursuant to this Agreement, the Trust agrees
that you shall not be liable under this Agreement for any error of judgment
or mistake of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, provided that nothing in this
Agreement shall be deemed to protect or purport to protect you against any
liability to the Trust, the Fund or its shareholders to which you would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of your duties, or by reason of your reckless
disregard of your obligations and duties hereunder.
A-6
<PAGE> 52
8. Duration and Termination of This Agreement. This Agreement shall
remain in force until September 30, 1999, and continue in force from year
to year thereafter, but only so long as such continuance is specifically
approved at least annually (a) by the vote of a majority of the Trustees
who are not parties to this Agreement or interested persons of any party to
this Agreement, cast in person at a meeting called for the purpose of
voting on such approval, and (b) by the Trustees of the Trust, or by the
vote of a majority of the outstanding voting securities of the Fund. The
aforesaid requirement that continuance of this Agreement be "specifically
approved at least annually" shall be construed in a manner consistent with
the 1940 Act and the rules and regulations thereunder and any applicable
SEC exemptive order therefrom.
This Agreement may be terminated with respect to the Fund at any time,
without the payment of any penalty, by the vote of a majority of the
outstanding voting securities of the Fund or by the Trust's Board of
Trustees on 60 days' written notice to you, or by you on 60 days' written
notice to the Trust. This Agreement shall terminate automatically in the
event of its assignment.
This Agreement may be terminated with respect to the Fund at any time
without the payment of any penalty by the Board of Trustees or by vote of a
majority of the outstanding voting securities of the Fund in the event that
it shall have been established by a court of competent jurisdiction that
you or any of your officers or directors has taken any action which results
in a breach of your covenants set forth herein.
9. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought, and no amendment of
this Agreement shall be effective until approved in a manner consistent
with the 1940 Act and rules and regulations thereunder and any applicable
SEC exemptive order therefrom.
10. Limitation of Liability for Claims. The Declaration, a copy of
which, together with all amendments thereto, is on file in the Office of
the Secretary of the Commonwealth of Massachusetts, provides that the name
"Investors Fund Series" 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
A-7
<PAGE> 53
any such obligation from the shareholders or any shareholder of the Fund or
any other series of the Trust, or from any Trustee, officer, employee or
agent of the Trust. You understand that the rights and obligations of each
Fund, or series, under the Declaration are separate and distinct from those
of any and all other series.
11. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each
of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
In interpreting the provisions of this Agreement, the definitions
contained in Section 2(a) of the 1940 Act (particularly the definitions of
"affiliated person," "assignment" and "majority of the outstanding voting
securities"), as from time to time amended, shall be applied, subject,
however, to such exemptions as may be granted by the SEC by any rule,
regulation or order.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, provided that nothing herein shall be
construed in a manner inconsistent with the 1940 Act, or in a manner which
would cause the Fund to fail to comply with the requirements of Subchapter
M of the Code.
This Agreement shall supersede all prior investment advisory or
management agreements entered into between you and the Trust on behalf of
the Fund.
If you are in agreement with the foregoing, please execute the form of
acceptance on the accompanying counterpart of this letter and return such
A-8
<PAGE> 54
counterpart to the Trust, whereupon this letter shall become a binding
contract effective as of the date of this Agreement.
Yours very truly,
INVESTORS FUND SERIES, on behalf of
[Name of Fund]
By:
------------------------------------------------
Title:
------------------------------------------------
The foregoing Agreement is hereby accepted as of the date hereof.
SCUDDER KEMPER INVESTMENTS, INC.
By:
------------------------------------------------
Title:
------------------------------------------------
A-9
<PAGE> 55
EXHIBIT B
INVESTMENT OBJECTIVES AND ADVISORY FEES
FOR FUNDS NOT INCLUDED IN THIS PROXY STATEMENT AND
ADVISED BY SCUDDER KEMPER INVESTMENTS, INC.
SCUDDER FUNDS+
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
MONEY MARKET FUNDS
Government Money Market High level of current income 0.250% of net assets++ $ 83,870,139
Series consistent with preservation
of capital and liquidity.
Money Market Series High level of current income 0.250% of net assets++ $1,041,528,715
consistent with preservation
of capital and liquidity.
Scudder Cash Investment Trust Stability of capital while 0.500% to $250 million $1,182,012,567
maintaining liquidity of 0.450% next $250 million
capital and providing current 0.400% next $500 million
income. 0.350% thereafter++
Scudder U.S. Treasury Money Safety, liquidity, and 0.500% of net assets++ $ 388,528,203
Fund stability of capital and,
consistent therewith, current
income.
U.S. INCOME FUNDS
Scudder Corporate Bond Fund A high level of current income 0.650% of net assets N/A**
through investment primarily
in investment-grade corporate
debt securities.
Scudder GNMA Fund High current income primarily 0.650% to $200 million $ 392,444,820
from U.S. Government 0.600% next $300 million
guaranteed mortgage-backed 0.550% thereafter
Ginnie Mae securities.
Scudder High Yield Bond Fund A high level of current income 0.700% of net assets++ $ 176,221,237
and, secondarily, capital
appreciation through
investment primarily in below
investment-grade domestic debt
securities.
Scudder Income Fund A high level of income, 0.650% to $200 million $ 695,255,717
consistent with the prudent 0.600% next $300 million
investment of capital, through 0.550% thereafter
a flexible investment program
emphasizing high-grade bonds.
Scudder Short Term Bond Fund High level of income 0.600% to $500 million $1,165,531,162
consistent with a high degree 0.500% next $500 million
of principal stability by 0.450% next $500 million
investing primarily in high 0.400% next $500 million
quality short-term bonds 0.375% next $1 billion
0.350% thereafter
Scudder Zero Coupon 2000 Fund As high an investment return 0.600% of net assets++ $ 20,453,972
over a selected period as is
consistent with investment in
U.S. Government securities and
the minimization of
reinvestment risk.
</TABLE>
B-1
<PAGE> 56
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
GLOBAL INCOME FUNDS
Scudder Emerging Markets High current income and, 1.000% of net assets $ 323,628,082
Income Fund secondarily, long term capital
appreciation by investing
primarily in high-yielding
debt securities issued by
governments and corporations
in emerging markets.
Scudder Global Bond Fund Total return with an emphasis 0.750% to $1 billion $ 135,113,465
on current income by investing 0.700% thereafter++
primarily in high-grade bonds
denominated in foreign
currencies and the U.S.
dollar. As a secondary
objective, the Fund will seek
capital appreciation.
Scudder International Bond Income primarily by investing 0.850% to $1 billion $ 145,818,767
Fund in a managed portfolio of 0.800% thereafter++
high-grade international bonds
and, secondarily, protection
and possible enhancement of
principal value by actively
managing currency, bond market
and maturity exposure and by
security selection.
ASSET ALLOCATION FUNDS
Scudder Pathway Balanced Balance of growth and income There will be no fee as $ 192,145,173
Portfolio by investing in a mix of the Manager will receive
Scudder money market, bond and a fee from the
equity mutual funds. underlying funds
Scudder Pathway Conservative Current income and, There will be no fee as $ 16,971,681
Portfolio secondarily, long term growth the Manager will receive
of capital by investing a fee from the
substantially in Scudder bond underlying funds
mutual funds, but will have
some exposure to Scudder
equity mutual funds.
Scudder Pathway Growth Long term growth of capital by There will be no fee as $ 49,574,256
Portfolio investing predominantly in the Manager will receive
Scudder equity mutual funds a fee from the
designed to provide long term underlying funds
growth.
Scudder Pathway International Maximize total return, There will be no fee as $ 11,728,045
Portfolio consisting of capital the Manager will receive
appreciation plus dividend a fee from the
income and interest by underlying funds
investing in a select mix of
established international and
global Scudder Funds.
U.S. GROWTH AND INCOME FUNDS
Scudder Balanced Fund A balance of growth and income 0.700% of net assets++ $ 158,711,908
from a diversified portfolio
of equity and fixed-income
securities and long term
preservation of capital
through a quality-oriented
investment approach designed
to reduce risk.
</TABLE>
B-2
<PAGE> 57
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder Dividend & Growth High current income and long 0.750% of net assets N/A**
Fund term growth of capital through
investment in income paying
equity securities.
Scudder Growth and Income Long term growth of capital, 0.600% to $500 million $6,833,584,122
Fund current income and growth of 0.550% next $500 million
income. 0.500% next $500 million
0.475% next $500 million
0.450% next $1 billion
0.425% next $1.5 billion
0.405% next 1.5 billion
0.3875% next $4 billion
0.370% over $10 billion*
U.S. GROWTH FUNDS
Classic Growth Fund Long term growth of capital 0.700% of net assets++ $ 53,225,783
with reduced share price
volatility compared to other
growth mutual funds.
Scudder 21st Century Growth Long term growth of capital by 1.000% of net assets++ $ 23,296,176
Fund investing primarily in the
securities of emerging growth
companies poised to be leaders
in the 21st century.
Scudder Development Fund Long term growth of capital by 1.000% to $500 million $ 845,405,075
investing primarily in 0.950% next $500 million
securities of small and medium 0.900% thereafter
size growth companies.
Scudder Financial Services Long term growth of capital by 0.750% of net assets++ $ 36,926,469@
Fund investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Scudder Health Care Fund Long term growth of capital by 0.850% of next assets++ $ 40,923,873@
investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Scudder Large Company Growth Long term growth of capital 0.700% of net assets $ 288,064,975
Fund (formerly Scudder through investment primarily
Quality Growth Fund) in the equity securities of
seasoned, financially strong
U.S. growth companies.
Scudder Large Company Value Maximize long term capital 0.750% to $500 million $2,212,733,138
Fund (formerly Scudder appreciation through a value 0.650% next $500 million
Capital Growth Fund) driven investment program. 0.600% next $500 million
0.550% next $500 million
0.500% next $1.0 billion*
Scudder Micro Cap Fund Long term growth of capital by 0.750% of net assets $ 91,627,404
investing primarily in a
diversified portfolio of U.S.
micro-cap common stocks.
Scudder Real Estate Long term capital growth and 0.800% of net assets++ $ 20,435,489
Investment Fund current income by investing
primarily in equity securities
of companies in the real
estate industry.
</TABLE>
B-3
<PAGE> 58
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder S&P 500 Index Fund Investment results that, 0.150% of net assets++ $ 16,912,276
before expenses, correspond to
the total return of common
stocks publicly traded in the
United States, as represented
by the Standard & Poor's 500
Composite Stock Price Index.
Scudder Small Company Value Long term growth of capital by 0.750% of net assets $ 123,398,822
Fund investing primarily in
undervalued stocks of small
U.S. companies.
Scudder Technology Fund Long term growth of capital by 0.850% of net assets++ $ 37,159,344@
investing primarily in common
stocks and other equity
securities of companies in a
group of related industries.
Value Fund Long term growth of capital 0.700% to $500 million $ 297,979,779
through investment in 0.650% over $500
undervalued equity securities. million*
GLOBAL GROWTH FUNDS
Global Discovery Fund Above-average capital 1.100% of net assets $ 349,121,954
appreciation over the long
term by investing primarily in
the equity securities of small
companies located throughout
the world.
Scudder Emerging Markets Long term growth of capital 1.250% of net assets++ $ 219,624,481
Growth Fund primarily through equity
investment in emerging markets
around the globe.
Scudder Global Fund Long term growth of capital 1.000% to $500 million $1,766,207,742
through a diversified 0.950% next $500 million
portfolio of marketable 0.900% next $500 million
securities, primarily equity 0.850% over $1.5 billion
securities, including common
stock, preferred stocks and
debt securities convertible
into common stocks.
Scudder Gold Fund Maximum return (principal 1.000% of net assets $ 132,131,545
change and income) consistent
with investing in a portfolio
of gold-related equity
securities and gold.
Scudder Greater Europe Growth Long term growth of capital 1.000% to $1 billion $ 195,514,335
Fund through investments primarily 0.900% thereafter*
in the equity securities of
European companies.
Scudder International Fund Long term growth of capital 0.900% to $500 million $2,884,919,345
primarily from foreign equity 0.850% next $500 million
securities. 0.800% next $1 billion
0.750% next $1 billion
0.700% thereafter
Scudder International Growth Long term growth of capital 1.000% of net assets++ $ 48,880,164
and Income Fund and current income primarily
from foreign equity
securities.
</TABLE>
B-4
<PAGE> 59
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder International Growth Long term capital appreciation 1.000% of net assets N/A**
Fund through investment primarily
in the equity securities of
foreign companies with high
growth potential.
Scudder International Value Long term capital appreciation 1.000% of net assets N/A**
Fund through investment primarily
in undervalued foreign equity
securities.
Scudder Latin America Fund Long term capital appreciation 1.250% to $1 billion $ 882,555,049
through investment primarily 1.150% thereafter
in the securities of Latin
American issuers.
Scudder Pacific Opportunities Long term growth of capital 1.100% of net assets $ 147,276,692
Fund primarily through investment
in the equity securities of
Pacific Basin companies,
excluding Japan.
The Japan Fund, Inc. Long term capital appreciation 0.850% to $100 million $ 265,181,931
through investment primarily 0.750% next $200 million
in equity securities, 0.700% next $300 million
(including American Depository 0.650% thereafter
Receipts) of Japanese
companies.
CLOSED-END FUNDS
The Argentina Fund, Inc. Long term capital appreciation Adviser: $ 135,327,320
through investment primarily 1.100% of net assets(#)
in equity securities of Sub-Adviser:
Argentine issuers. Paid by Adviser. 0.160%
of net assets
The Brazil Fund, Inc. Long term capital appreciation 1.200% to $150 million $ 429,429,751
through investment primarily 1.050% next $150 million
in equity securities of 1.000% next $200 million
Brazilian issuers. 0.900% thereafter
Administrator: Receives
an annual fee of $50,000
The Korea Fund, Inc. Long term capital appreciation Adviser: $ 406,244,000
through investment primarily 1.150% to $50 million
in equity securities of Korean 1.100% next $50 million
companies. 1.000% next $250 million
0.950% next $400 million
0.900% thereafter
Sub-Adviser -- Daewoo:
Paid by Adviser.
0.2875% to $50 million
0.275% next $50 million
0.250% next $250 million
0.2375% next
$400 million
0.225% thereafter
Montgomery Street Income High level of current income 0.500% to $150 million $ 207,315,702
Securities, Inc. consistent with prudent 0.450% next $50 million
investment risks through a 0.400% thereafter
diversified portfolio
primarily of debt securities.
</TABLE>
B-5
<PAGE> 60
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
Scudder Global High Income High level of current income 1.200% of net assets $ 80,721,844
Fund, Inc. (formerly The and, secondarily, capital
Latin America Dollar Income appreciation through
Fund, Inc.) investment principally in
dollar-denominated Latin
American debt instruments.
Scudder New Asia Fund, Inc. Long term capital appreciation 1.250% to $75 million $ 98,866,168
through investment primarily 1.150% next $125 million
in equity securities of Asian 1.100% thereafter
companies.
Scudder New Europe Fund, Inc. Long term capital appreciation 1.250% to $75 million $ 320,293,393
through investment primarily 1.150% next $125 million
in equity securities of 1.100% thereafter
companies traded on smaller or
emerging European markets and
companies that are viewed as
likely to benefit from changes
and developments throughout
Europe.
Scudder Spain and Portugal Long term capital appreciation Adviser: $ 112,909,567
Fund, Inc. through investment primarily 1.000% of net assets
in equity securities of Administrator:
Spanish & Portuguese issuers. 0.200% of net assets
INSURANCE PRODUCTS
Scudder Variable Life Balance of growth and income, 0.475% of net assets $ 118,373,215
Investment Fund Balanced as well as long term
Portfolio preservation of capital, from
a diversified portfolio of
equity and fixed income
securities.
Scudder Variable Life High level of income from a 0.475% of net assets $ 81,387,032
Investment Fund Bond high quality portfolio of
Portfolio bonds.
Scudder Variable Life Maximize long term capital 0.475% to $500 million $ 676,317,582
Investment Fund Capital growth from a portfolio 0.450% next $500 million
Growth Portfolio consisting primarily of equity 0.425% on assets
securities. over $1.0 billion*
Scudder Variable Life Above-average capital 0.975% of net assets++ $ 20,115,141
Investment Fund Global appreciation over the long
Discovery Portfolio term by investing primarily in
the equity securities of small
companies located throughout
the world.
Scudder Variable Life Long term growth of capital, 0.475% of net assets $ 163,603,606
Investment Fund Growth and current income and growth of
Income Portfolio income from a portfolio
consisting primarily of common
stocks and securities
convertible into common
stocks.
Scudder Variable Life Long term growth of capital 0.875% to $500 million $ 427,237,880
Investment Fund principally from a diversified 0.725% thereafter
International Portfolio portfolio of foreign equity
securities.
Scudder Variable Life Stability of capital and 0.370% of net assets $ 102,576,377
Investment Fund Money current income from a
Market Portfolio portfolio of money market
instruments.
</TABLE>
B-6
<PAGE> 61
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
AARP FUNDS
AARP Balanced Stock and Bond Long term capital growth and 0.350% to $2 billion $ 638,356,257
Fund income, consistent with a 0.330% next $2 billion
share price more stable than 0.300% next $2 billion
other balanced mutual funds, 0.280% next $2 billion
through investment in a 0.260% next $3 billion
combination of stocks, bonds 0.250% next $3 billion
and cash reserves. 0.240% thereafter
INDIVIDUAL FUND FEE
0.190% of net assets
AARP Bond Fund for Income High level of current income, 0.350% to $2 billion $ 58,324,146
consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
long term bond mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in investment-grade debt 0.250% next $3 billion
securities. 0.240% thereafter++
INDIVIDUAL FUND FEE
0.280% of net assets
AARP Capital Growth Fund Long term capital growth, 0.350% to $2 billion $1,228,379,954
consistent with a share price 0.330% next $2 billion
more stable than other growth 0.280% next $2 billion
funds, through investment in a 0.260% next $3 billion
combination of common stocks 0.250% next $3 billion
and securities convertible 0.240% thereafter
into common stocks. INDIVIDUAL FUND FEE
0.320% of net assets
AARP Diversified Growth Long term growth of capital There will be no fee as $ 61,796,818
Portfolio through investment primarily the manager will receive
in AARP stock mutual funds. a fee from the
underlying funds
AARP Diversified Income with Current income with modest There will be no fee as $ 43,446,418
Growth Portfolio long term appreciation through the manager will receive
investment primarily in AARP a fee from the
bond mutual funds. underlying funds
AARP Global Growth Fund Long term capital growth, 0.350% to $2 billion $ 148,029,373
consistent with a share price 0.330% next $2 billion
more stable than other global 0.300% next $2 billion
funds, through investment 0.280% next $2 billion
primarily in common stocks of 0.260% next $3 billion
established corporations in a 0.250% next $3 billion
wide variety of developed 0.240% thereafter
countries. INDIVIDUAL FUND FEE
0.550% of net assets
AARP GNMA and U.S. Treasury High level of current income, 0.350% to $2 billion $4,583,980,460
Fund consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
GNMA mutual funds, through 0.280% next $2 billion
investment primarily in high 0.260% next $3 billion
quality U.S. Government- 0.250% next $3 billion
guaranteed GNMA securities and 0.240% thereafter
U.S. Treasury obligations. INDIVIDUAL FUND FEE
0.120% of net assets
</TABLE>
B-7
<PAGE> 62
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
AARP Growth and Income Fund Long term capital growth and 0.350% to $2 billion $6,606,012,897
income, consistent with a 0.330% next $2 billion
share price more stable than 0.300% next $2 billion
other growth and income mutual 0.280% next $2 billion
funds, through investment 0.260% next $3 billion
primarily in common stocks 0.250% next $3 billion
with above-average dividend 0.240% thereafter
yields and securities INDIVIDUAL FUND FEE
convertible into common 0.190% of net assets
stocks.
AARP High Quality Short Term High level of current income, 0.350% to $2 billion $ 454,869,518
Bond Fund consistent with greater share 0.330% next $2 billion
price stability than other 0.300% next $2 billion
short-term bond mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in a portfolio of high 0.250% next $3 billion
quality, short-term 0.240% thereafter
securities. INDIVIDUAL FUND FEE
0.190% of net assets
AARP High Quality Money Fund Current income consistent with 0.350% to $2 billion $ 471,310,867
maintaining stability and 0.330% next $2 billion
safety of principal and a 0.300% next $2 billion
constant net asset value of 0.280% next $2 billion
$1.00 per share while offering 0.260% next $3 billion
liquidity, through investment 0.250% next $3 billion
in high quality securities. 0.240% thereafter
INDIVIDUAL FUND FEE
0.100% of net assets
AARP International Growth and Long term capital growth, 0.350% to $2 billion $ 20,259,062
Income Fund consistent with a share price 0.330% next $2 billion
more stable than other 0.300% next $2 billion
international mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in a diversified portfolio of 0.250% next $3 billion
foreign common stocks with 0.240% thereafter++
above-average dividend yields INDIVIDUAL FUND FEE
and foreign securities 0.600% of net assets
convertible into common
stocks.
AARP Small Company Stock Fund Long term growth of capital, 0.350% to $2 billion $ 50,271,473
consistent with a share price 0.330% next $2 billion
more stable than other small 0.300% next $2 billion
company stock mutual funds, 0.280% next $2 billion
through investment primarily 0.260% next $3 billion
in common stocks of small U.S. 0.250% next $3 billion
companies. 0.240% thereafter++
INDIVIDUAL FUND FEE
0.550% of net assets
</TABLE>
B-8
<PAGE> 63
<TABLE>
<CAPTION>
FUND OBJECTIVE FEE RATE NET ASSETS
---- --------- -------- ----------
<S> <C> <C> <C>
AARP U.S. Stock Index Fund Long term capital growth and 0.350% to $2 billion $ 38,085,073
income, consistent with 0.330% next $2 billion
greater share price stability 0.300% next $2 billion
than an S&P 500 Index mutual 0.280% next $2 billion
fund, by taking an indexing 0.260% next $3 billion
approach to investing in 0.250% next $3 billion
common stocks, emphasizing 0.240% thereafter++
higher dividend stocks while INDIVIDUAL FUND FEE
maintaining investment 0.000% of net assets
characteristics otherwise
similar to the S&P 500 Index.
</TABLE>
- ------------------------------
+ The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
++ Subject to waivers and/or expense limitations.
* The addition of this breakpoint is effective October 1, 1998.
** Net asset information is not available for Scudder Dividend & Growth Fund,
which commenced operations on June 1, 1998; Scudder Corporate Bond Fund,
which commenced operations on August 31, 1998; or Scudder International
Growth Fund and Scudder International Value Fund, each of which commenced
operations on September 1, 1998.
@ Net asset information is provided for the semi-annual period ended May 31,
1998.
(#) This fee rate was reduced to 1.04% on October 27, 1998.
B-9
<PAGE> 64
KEMPER FUNDS(+)
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
EQUITY/GROWTH STYLE FUNDS
Kemper Aggressive Growth Capital appreciation through 0.650% of net assets $ 11,609,000
Fund the use of aggressive plus or minus an
investment techniques. incentive fee based on
the performance of the
Standard & Poor's 500
Stock Index, which may
result in a fee ranging
from 0.450 of 1.000% to
0.850 of 1.000% of net
assets
Kemper Blue Chip Fund Growth of capital and income. 0.580% to $250 million $ 446,891,000
0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Growth Fund Growth of capital through 0.580% to $250 million $2,827,565,000
professional management and 0.550% next $750 million
diversification of investment 0.530% next $1.5 billion
securities having potential 0.510% next $2.5 billion
for capital appreciation. 0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Quantitative Equity Growth of capital and 0.580% to $250 million $ 11,217,000
Fund reduction of risk through 0.550% next $750 million
professional management of a 0.530% next $1.5 billion
diversified portfolio of 0.510% next $2.5 billion
equity securities. 0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Small Capitalization Maximum capital appreciation. 0.650% of net assets $1,095,478,000
Equity Fund plus or minus an
incentive fee based on
the performance of the
Standard & Poor's 500
Stock Index, which may
result in a fee ranging
from 0.350 of 1.000% to
0.950 of 1.000% of net
assets
Kemper Technology Fund Growth of capital. 0.580% to $250 million $1,209,723,000
0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
</TABLE>
B-10
<PAGE> 65
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper Total Return Fund The highest total return, a 0.580% to $250 million $3,241,383,000
combination of income and 0.550% next $750 million
capital gain, consistent with 0.530% next $1.5 billion
reasonable risk. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Value + Growth Fund Growth of capital through 0.720% to $250 million $ 97,741,000
professional management of 0.690% next $750 million
growth and value stocks. 0.660% next $1.5 billion
0.640% next $2.5 billion
0.600% next $2.5 billion
0.580% next $2.5 billion
0.560% next $2.5 billion
0.540% thereafter
EQUITY/VALUE STYLE FUNDS
Kemper Contrarian Fund Long-term capital 0.750% to $250 million $ 178,115,000
appreciation and, 0.720% next $750 million
secondarily, current income. 0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Small Cap Relative Long-term capital 0.750% to $250 million N/A*
Value Fund appreciation. 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter**
Kemper Small Cap Value Fund Long-term capital 0.750% to $250 million $1,263,144,000
appreciation 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper U.S. Growth and Long-term growth of capital, 0.600% to $250 million $ 3,864,000***
Income Fund current income and growth of 0.570% next $750 million
income. 0.550% next $1.5 billion
0.530% thereafter
Kemper-Dreman Financial Long-term capital 0.750% to $250 million N/A*
Services Fund appreciation by investing 0.720% next $750 million
primarily in common stocks 0.700% next $1.5 billion
and other equity securities 0.680% next $2.5 billion
of companies in the financial 0.650% next $2.5 billion
services industry believed by 0.640% next $2.5 billion
the Fund's investment manager 0.630% next $2.5 billion
to be undervalued. 0.620% thereafter**
</TABLE>
B-11
<PAGE> 66
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper-Dreman High Return High total rate of return. 0.750% to $250 million $2,931,721,000
Equity Fund 0.720% next $750 million
0.700% next $1.5 billion
0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
GLOBAL AND INTERNATIONAL FUNDS
Kemper Asian Growth Fund Long-term capital growth by 0.850% to $250 million $ 6,398,000
investing in a diversified 0.820% next $750 million
portfolio of Asian equity 0.800% next $1.5 billion
securities. 0.780% next $2.5 billion
0.750% next $2.5 billion
0.740% next $2.5 billion
0.730% next $2.5 billion
0.720% thereafter**
Kemper Emerging Markets Long-term growth of capital 1.250% of net assets** $ 1,147,000@
Growth Fund primarily through equity
investment in emerging
markets around the globe.
Kemper Emerging Markets High current income and, 1.000% of net assets** $ 5,616,000@
Income Fund secondarily, long-term
capital appreciation.
Kemper Europe Fund Long-term capital growth by 0.750% to $250 million $ 23,910,000
investing in a diversified 0.720% next $750 million
portfolio of European equity 0.700% next $1.5 billion
securities. 0.680% next $2.5 billion
0.650% next $2.5 billion
0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper Global Blue Chip Fund Long-term growth of capital 1.000% to $250 million $ 3,663,000@
through a diversified 0.950% next $750 million
worldwide portfolio of 0.900% thereafter**
marketable securities,
primarily equity securities.
Kemper Global Income Fund High current income 0.750% to $250 million $ 99,054,000
consistent with prudent total 0.720% next $750 million
return asset management by 0.700% next $1.5 billion
investing in a portfolio of 0.680% next $2.5 billion
investment grade foreign and 0.650% next $2.5 billion
domestic fixed income 0.640% next $2.5 billion
securities. 0.630% next $2.5 billion
0.620% thereafter
Kemper International Fund Total return, a combination 0.750% to $250 million $ 588,069,000
of capital growth and income, 0.720% next $750 million
principally through an 0.700% next $1.5 billion
internationally diversified 0.680% next $2.5 billion
portfolio of equity 0.650% next $2.5 billion
securities. 0.640% next $2.5 billion
0.630% next $2.5 billion
0.620% thereafter
Kemper International Growth Long-term growth of capital 1.000% of net assets** $ 1,556,000@
and Income Fund and income, primarily from
foreign equity securities.
</TABLE>
B-12
<PAGE> 67
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper Latin America Fund Long-term capital 1.250% to $250 million $ 1,441,000@
appreciation through 1.200% next $750 million
investment primarily in the 1.150% thereafter**
securities of Latin American
issuers.
ASSET ALLOCATION FUNDS
Kemper Horizon 10+ Portfolio A balance between growth of 0.580% to $250 million $ 106,339,000
capital and income, 0.550% next $750 million
consistent with moderate 0.530% next $1.5 billion
risk. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 20+ Portfolio Growth of capital and, 0.580% to $250 million $ 110,076,000
secondarily, income. 0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper Horizon 5 Portfolio Income consistent with 0.580% to $250 million $ 55,335,000
preservation of capital and, 0.550% next $750 million
secondarily, growth of 0.530% next $1.5 billion
capital. 0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
TARGET EQUITY FUNDS
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 106,339,000
Series I guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 158,437,000
Series II guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 118,084,000
Series III guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 124,417,000
Series IV guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
</TABLE>
B-13
<PAGE> 68
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper Retirement Fund-- Long-term capital growth with 0.500% of net assets $ 125,886,000
Series V guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Long-term capital growth with 0.500% of net assets $ 70,487,000
Fund--Series VI guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Retirement Long-term capital growth with 0.500% of net assets $ 25,787,000
Fund--Series VII guaranteed return of
investment on the maturity
date to investors who
reinvest all dividends and
hold their shares to the
maturity date.
Kemper Worldwide 2004 Fund Total return with guaranteed 0.600% of net assets $ 33,070,000
return of investment on the
maturity date to investors
who reinvest all their
dividends and hold their
shares to the maturity date
(11/15/2004).
INCOME FUNDS
Kemper Adjustable Rate U.S. High current income 0.550% to $250 million $ 81,967,000
Government Fund consistent with low 0.520% next $750 million
volatility of principal. 0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
Kemper Diversified Income High current return. 0.580% to $250 million $ 861,543,000
Fund 0.550% next $750 million
0.530% next $1.5 billion
0.510% next $2.5 billion
0.480% next $2.5 billion
0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper High Yield Fund The highest level of current 0.580% to $250 million $4,939,302,000
income from a professionally 0.550% next $750 million
managed, diversified 0.530% next $1.5 billion
portfolio of fixed income 0.510% next $2.5 billion
securities consistent with 0.480% next $2.5 billion
reasonable risk. 0.460% next $2.5 billion
0.440% next $2.5 billion
0.420% thereafter
Kemper High Yield Total return through high 0.650% to $250 million $ 16,188,000
Opportunity Fund current income and capital 0.620% next $750 million
appreciation. 0.600% next $1.5 billion
0.580% next $2.5 billion
0.550% next $2.5 billion
0.530% next $2.5 billion
0.510% next $2.5 billion
0.490% thereafter
</TABLE>
B-14
<PAGE> 69
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper Income and Capital As high a level of current 0.550% to $250 million $ 613,470,000
Preservation Fund income as is consistent with 0.520% next $750 million
preservation of capital. 0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
Kemper Short-Intermediate High current income and 0.550% to $250 million $ 171,400,000
Government Fund preservation of capital, with 0.520% next $750 million
equal emphasis, from a 0.500% next $1.5 billion
portfolio primarily 0.480% next $2.5 billion
consisting of short-and 0.450% next $2.5 billion
intermediate-term U.S. 0.430% next $2.5 billion
Government securities. 0.410% next $2.5 billion
0.400% thereafter
Kemper U.S. Government High current income, 0.450% to $250 million $3,642,027,000
Securities Fund liquidity and security of 0.430% next $750 million
principal. 0.410% next $1.5 billion
0.400% next $2.5 billion
0.380% next $2.5 billion
0.360% next $2.5 billion
0.340% next $2.5 billion
0.320% thereafter
Kemper U.S. Mortgage Fund Maximum current return from 0.550% to $250 million $2,497,825,000
U.S. Government securities. 0.520% next $750 million
0.500% next $1.5 billion
0.480% next $2.5 billion
0.450% next $2.5 billion
0.430% next $2.5 billion
0.410% next $2.5 billion
0.400% thereafter
CLOSED-END FUNDS
The Growth Fund of Spain, Long-term capital 1.000% of net assets $ 315,059,000
Inc. appreciation by investing
primarily in equity
securities of Spanish
companies.
Kemper High Income Trust Highest current income 0.850% of net assets $ 222,919,000
obtainable consistent with
reasonable risk with capital
gains secondary.
Kemper Intermediate High current income 0.800% of net assets(2) $ 267,218,000
Government Trust consistent with preservation
of capital by investing in
U.S. and foreign government
securities.
Kemper Multi-Market Income High current income 0.850% of net assets(2) $ 217,508,000
Trust consistent with prudent total
return asset management by
investing in a diversified
portfolio of investment grade
tax-exempt securities.
Kemper Municipal Income High level of current income 0.550% of net assets(2) $ 686,179,000
Trust exempt from federal income
tax.
</TABLE>
B-15
<PAGE> 70
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Kemper Strategic Income Fund High current income by 0.850% of net assets(2) $ 53,129,000
investing its assets in a
combination of lower-rated
corporate fixed-income
securities, fixed-income
securities of emerging market
and other foreign issuers
and, fixed-income securities
of the U.S. Government and
its agencies and
instrumentalities and private
mortgage-backed issuers.
Kemper Strategic Municipal High level of current income 0.600% of net assets(2) $ 130,895,000
Income Trust exempt from federal income
tax by investing in a
diversified portfolio of
tax-exempt municipal
securities.
MONEY MARKET FUNDS
Government Securities Maximum current income to the 0.220% to $500 million $ 804,565,000
Portfolio (Cash Account extent consistent with 0.200% next $500 million
Trust) stability of capital from a 0.175% next $1 billion
portfolio of U.S. Government 0.160% next $1 billion
obligations. 0.150% thereafter(1)**
Government Securities Maximum current income to the 0.220% to $500 million $ 391,861,000
Portfolio (Cash Equivalent extent consistent with 0.200% next $500 million
Fund) stability of capital from a 0.175% next $1 billion
portfolio of U.S. Government 0.160% next $1 billion
obligations. 0.150% thereafter(4)
Government Securities Maximum current income to the 0.150% of net $ 312,194,000
Portfolio (Investors Cash extent consistent with assets(5)**
Trust) stability of capital by
investing in U.S. Government
obligations and repurchase
agreements.
Kemper Cash Reserves Fund Maximum current income to the 0.400% to $250 million $ 339,655,000
extent consistent with 0.380% next $750 million
stability of principal from a 0.350% next $1.5 billion
portfolio of high quality 0.320% next $2.5 billion
money market instruments. 0.300% next $2.5 billion
0.280% next $2.5 billion
0.260% next $2.5 billion
0.250% thereafter
Money Market Portfolio (Cash Maximum current income to the 0.220% to $500 million $1,995,057,000
Account Trust) extent consistent with 0.200% next $500 million
stability of capital from a 0.175% next $1 billion
portfolio primarily of 0.160% next $1 billion
commercial paper and bank 0.150% thereafter(1)**
obligations.
Money Market Portfolio (Cash Maximum current income to the 0.220% to $500 million $ 851,592,000
Equivalent Fund) extent consistent with 0.200% next $500 million
stability of capital from a 0.175% next $1 billion
portfolio primarily of 0.160% next $1 billion
commercial paper and bank 0.150% thereafter(4)
obligations.
</TABLE>
B-16
<PAGE> 71
<TABLE>
<CAPTION>
TRUST/FUND OBJECTIVE FEE RATE NET ASSETS
---------- --------- -------- ----------
<S> <C> <C> <C>
Treasury Portfolio Maximum current income to the 0.150% of net $ 74,290,000
(Investors Cash Trust) extent consistent with assets(5)**
stability of capital by
investing in U.S. Government
obligations and repurchase
agreements.
Zurich Government Money Fund Maximum current income to the 0.500% to $215 million $ 686,871,000
extent consistent with 0.375% next $335 million
stability of principal from a 0.300% next $250 million
portfolio of U.S. Government 0.250% thereafter(6)
obligations.
Zurich Money Market Fund Maximum current income to the 0.500% to $215 million $4,538,627,000
extent consistent with 0.375% next $335 million
stability of principal from a 0.300% next $250 million
portfolio primarily 0.250% thereafter(6)
consisting of commercial
paper and bank obligations.
Zurich YieldWise Money Fund Maximum current income to the 0.500% to $215 million $1,071,728,000
extent consistent with 0.375% next $335 million
stability of principal by 0.300% next $250 million
investing in high-quality 0.250% thereafter**
short-term money market
instruments
</TABLE>
- ------------------------------
(+) The information provided below is shown as of the end of each Fund's last
fiscal year, unless otherwise noted.
* Fee information is not available for Kemper-Dreman Financial Services Fund,
which commenced operations on March 9, 1998; Investors Michigan Municipal
Cash Fund, which commenced operations on April 6, 1998; or Kemper Small Cap
Relative Value Fund, which commenced operations on May 6, 1998.
** Subject to waivers and/or reimbursements.
*** Net asset information is provided for the semi-annual period ended April
30, 1998.
@ Net asset information is provided for the semi-annual period ended March 31,
1998.
(1) Payable in the aggregate for each of the Government Securities Portfolio,
Money Market Portfolio and Tax-Exempt Portfolio series of Cash Account
Trust.
(2) Based on average weekly net assets.
(3) Payable in the aggregate for each of the Investors Florida Municipal Cash
Fund, Investors New Jersey Municipal Cash Fund, Investors Pennsylvania
Municipal Cash Fund and Tax-Exempt New York Money Market Fund series of
Investors Municipal Cash Fund.
(4) Payable in the aggregate for each of the Government Securities Portfolio
and Money Market Portfolio series of Cash Equivalent Fund.
(5) Payable in the aggregate for each of the Government Securities Portfolio
and Treasury Portfolio series of Investors Cash Trust.
(6) Payable in the aggregate for each of the Zurich Government Money Fund,
Zurich Money Market Fund and Zurich Tax-Free Money Fund series of Zurich
Money Funds.
B-17
<PAGE> 72
EXHIBIT C
FORM OF NEW SIL
SUB-ADVISORY AGREEMENT
AGREEMENT made this 7th day of September, 1998, by and between SCUDDER
KEMPER INVESTMENTS, INC., a Delaware corporation (the "Adviser") and SCUDDER
INVESTMENTS (U.K.) LIMITED, an English corporation (the "Sub-Adviser").
WHEREAS, INVESTORS FUND SERIES, 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 [name of 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 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-
C-1
<PAGE> 73
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 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
C-2
<PAGE> 74
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
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
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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 _ % 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.
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
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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
September 30, 1999, 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 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.
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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:
------------------------------------------------
SCUDDER INVESTMENTS (U.K.) LIMITED
By:
------------------------------------------------
Title:
------------------------------------------------
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<PAGE> 78
EXHIBIT D
FORM OF NEW DVM
SUB-ADVISORY AGREEMENT
[Underlined language in brackets applies to Kemper-Dreman Financial
Services Portfolio only.]
[Language in plain text and in brackets applies to Kemper-Dreman High
Return Equity Portfolio only.]
AGREEMENT made this 7th day of September, 1998, by and between SCUDDER
KEMPER INVESTMENTS, INC., a Delaware corporation (the "Adviser") and DREMAN
VALUE MANAGEMENT, L.L.C., a Delaware limited liability company (the
"Sub-Adviser").
WHEREAS, INVESTORS FUND SERIES, a Massachusetts business trust (the "Fund")
is a management investment company registered under the Investment Company Act
of 1940 ("the Investment Company Act");
WHEREAS, the Fund has retained the Adviser to render to it investment
advisory and management services with regard to the Fund, including the series
known as the [Kemper-Dreman Financial Services Portfolio (the "Financial
Services Series")][Kemper-Dreman High Return Equity Portfolio (the "High Return
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 for the [Financial Services
Series][High Return Series] 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. Appointment of Sub-Adviser.
(a) The Adviser hereby employs the Sub-Adviser to manage the investment and
reinvestment of the assets of the [Financial Services Series][High Return
Series] 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 [Financial
Services Series][High Return Series] account with brokers or dealers selected by
the Sub-Adviser; and, in connection therewith, the Sub-Adviser is authorized as
the agent of the [Financial Services Series][High Return Series] to give
instructions to the Custodian and Accounting Agent of the Fund as to the
deliveries of securities and payments of cash for the account of the [Financial
Services Series][High Return Series]. In connection with the selection of such
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brokers or dealers and the placing of such orders, the Sub-Adviser is directed
to seek for the [Financial Services Series][High Return Series] 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 [Financial Services
Series][High Return Series] 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 [Financial Services Series][High Return Series] 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 to the extent the same
are provided the Sub-Adviser.
(b) The Sub-Adviser accepts such employment and agrees during the period of
this Agreement to render such investment management services in accordance with
the applicable investment objectives, policies and limitations set out in the
Fund's prospectus and Statement of Additional Information, as amended from time
to time, to the extent the same are provided the Sub-Adviser, to furnish related
office facilities and equipment and clerical, bookkeeping and administrative
services for the [Financial Services Series][High Return Series], and to assume
the other obligations herein set forth for the compensation herein provided. The
Sub-Adviser shall assume and pay all of the costs and expenses of performing its
obligations under this Agreement. 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, the [Financial Services Series][High Return Series] or the
Adviser in any way or otherwise be deemed an agent of the Fund, the [Financial
Services Series][High Return Series] or the Adviser.
(c) The Sub-Adviser will keep the Adviser, for itself and on behalf of the
Fund, informed of developments materially affecting the Fund or the [Financial
Services Series][High Return Series] and shall, on the Sub-Adviser's own
initiative and as reasonably requested by the Adviser, for itself and on behalf
of the Fund, furnish to the Adviser from time to time whatever information the
Adviser reasonably believes appropriate for this purpose.
(d) The Sub-Adviser shall provide the Adviser with such investment
portfolio accounting and shall maintain and provide such detailed records and
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reports as the Adviser may from time to time reasonably request, including
without limitation, daily processing of investment transactions and 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 the Management
Agreement. Sub-Adviser agrees to install in its offices computer equipment or
software, as provided by the Adviser at its expense, for use by the Sub-Adviser
in performing its duties under this Sub-Advisory Agreement, including inputting
on a daily basis that day's portfolio transactions in the [Financial Services
Series][High Return Series].
(e) The Sub-Adviser shall maintain and enforce adequate security procedures
with respect to all materials, records, documents and data relating to any of
its responsibilities pursuant to this Agreement including all means for the
effecting of securities transactions.
(f) The Sub-Adviser agrees that it will provide to the Adviser or the Fund
promptly upon request reports and copies of such of its investment records and
ledgers with respect to the [Financial Services Series][High Return Series] as
appropriate to assist the Adviser and the Fund in monitoring compliance with the
Investment Company Act and the Investment Advisers Act of 1940 (the "Advisers
Act"), 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
[Financial Services Series][High Return Series] as the Adviser or the Board of
Trustees may reasonably request, including statistical information with respect
to the [Financial Services Series'][High Return Series'] securities.
(g) In compliance with the requirements of Rule 31a-3 under the Investment
Company Act, 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 any such records upon the Fund's or the Adviser's request, although the
Sub-Adviser may, at the Sub-Adviser's own expense, make and retain copies of
such records. The Sub-Adviser further agrees to preserve for the periods
prescribed by Rule 31a-2 under the Investment Company Act any records with
respect to the Sub-Adviser's duties hereunder required to be maintained by Rule
31a-1 under the Investment Company 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 Advisers Act for the period
specified in that Rule.
(h) 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 ("SEC") or other regulatory authority.
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<PAGE> 81
(i) The Sub-Adviser agrees that it will immediately forward, upon receipt,
to the Adviser, for itself and as agent for the Fund, any correspondence from
the SEC or other regulatory authority that relates to the [Financial Services
Series] [High Return Series].
(j) The Sub-Adviser acknowledges that it is an "investment adviser" to the
Fund within the meaning of the Investment Company Act and the Advisers Act.
(k) 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. 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. Furthermore, the Sub-Adviser shall
maintain and enforce a Code of Ethics which in form and substance is consistent
with industry norms as changed from time to time. Sub-Adviser agrees to allow
the Board of Trustees of the Fund to review its Code of Ethics upon request.
Sub-Adviser agrees to report to the Adviser on a quarterly basis any violations
of the Code of Ethics of which its senior management becomes aware.
2. Compensation.
For the services and facilities described herein, the Adviser will pay to
the Sub-Adviser, 15 days after the end of each calendar month, the unpaid
balance of a fee equal to 1/12 of .240 of 1 percent of the average daily net
assets as defined below of the [Financial Services Series][High Return Series]
for such month; provided that, for any calendar month during which the average
of such values exceeds $250,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $250,000,000 shall be 1/12 of
.230 of 1 percent of such portion; provided that, for any calendar month during
which the average of such values exceeds $1,000,000,000, the fee payable for
that month based on the portion of the average of such values in excess of
$1,000,000,000 shall be 1/12 of .224 of 1 percent of such portion; provided
that, for any calendar month during which the average of such values exceeds
$2,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $2,500,000,000 shall be 1/12 of .218 of 1
percent of such portion; provided that, for any calendar month during which the
average of such values exceeds $5,000,000,000, the fee payable for that month
based on the portion of the average of such values in excess of $5,000,000,000
shall be 1/12 of .208 of 1 percent of such portion; provided that, for any
calendar month during which the average of such values exceeds $7,500,000,000,
the fee payable for that month based on the portion of the average of such
values in excess of $7,500,000,000 shall be 1/12 of .205 of 1 percent of such
portion; provided that, for any calendar month during which the average of such
values exceeds $10,000,000,000, the fee payable for that month based on the
portion of the average of such values in excess of $10,000,000,000 shall be
1/12 of .202 of 1 percent of such portion; and provided that, for any calendar
month during which the average of such values exceeds
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<PAGE> 82
$12,500,000,000, the fee payable for that month based on the portion of the
average of such values in excess of $12,500,000,000 shall be 1/12 of .198 of 1
percent of such portion.
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.
3. Net Asset Value. The net asset value for the [Financial Services
Series] [High Return Series] 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. On each day when net asset value is not calculated, the
net asset value of the [Financial Services Series][High Return Series] shall be
deemed to be the net asset value as of the close of business on the last day on
which such calculation was made for the purpose of the foregoing computations.
4. Duration and Termination.
(a) This Agreement shall become effective with respect to the [Financial
Services Series][High Return Series] on the date hereof and shall remain in full
force until May 1, 2003, unless sooner terminated or not annually approved as
hereinafter provided. Notwithstanding the foregoing, this Agreement shall
continue in force through May 1, 2003, and from year to year thereafter, only as
long as such continuance is specifically approved at least annually and in the
manner required by the Investment Company Act and the rules and regulations
thereunder, with the first annual renewal to be coincident with the next renewal
of the Management Agreement.
(b) This Agreement shall automatically terminate in the event of its
assignment or in the event of the termination of the Management Agreement. In
addition, Adviser has the right to terminate this Agreement upon immediate
notice if the Sub-Adviser becomes statutorily disqualified from performing its
duties under this Agreement or otherwise is legally prohibited from operating as
an investment adviser.
(c) This Agreement may be terminated at any time, without the payment by
the Fund of any penalty, by the Board of Trustees of the Fund, or by vote of a
majority of the outstanding voting securities of the [Financial Services Series]
[High Return Series], or by the Adviser. The Fund may effect termination of this
Agreement by action of the Board of Trustees of the Fund or by vote of a
majority of the outstanding voting securities of the [Financial Services Series]
[High Return Series] on sixty (60) days written notice to the Adviser and the
Sub-Adviser. The Adviser may effect termination of this Agreement on sixty (60)
days written notice to the Sub-Adviser.
(d) Sub-Adviser may not terminate this Agreement prior to the third
anniversary of the date of this Agreement. Sub-Adviser may terminate this
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<PAGE> 83
Agreement effective on or after the third anniversary of the date of this
Agreement upon ninety (90) days written notice to the Adviser.
(e) The terms "assignment" and "vote of a majority of the outstanding
voting securities" shall have the meanings set forth in the Investment Company
Act and the rules and regulations thereunder.
5. Representations and Warranties. The Sub-Adviser hereby represents and
warrants as follows:
(a) The Sub-Adviser is registered with the SEC as an investment adviser
under the Advisers Act, and such registration is current, complete and in full
compliance with all material applicable provisions of the Advisers Act and the
rules and regulations thereunder;
(b) The Sub-Adviser has all requisite authority to enter into, execute,
deliver and perform the Sub-Adviser's obligations under this Agreement;
(c) The Sub-Adviser's performance of its obligations under this Agreement
does not conflict with any law, regulation or order to which the Sub-Adviser is
subject; and
(d) The Sub-Adviser has reviewed the portion of (i) the registration
statement filed with the SEC, as amended from time to time for the Fund
("Registration Statement"), and (ii) the Fund's prospectus and supplements
thereto, in each case in the form received from the Adviser with respect to the
disclosure about the Sub-Adviser and the [Financial Services Series][High Return
Series] of which the Sub-Adviser has knowledge (the "Sub-Adviser and High Return
Information") and except as advised in writing to the Adviser such Registration
Statement, prospectus and any supplement contain, as of its date, no untrue
statement of any material fact of which Sub-Adviser has knowledge and do not
omit any statement of a material fact of which Sub-Adviser has knowledge which
was required to be stated therein or necessary to make the statements contained
therein not misleading.
6. Covenants. The Sub-Adviser hereby covenants and agrees that, so long
as this Agreement shall remain in effect:
(a) The Sub-Adviser shall maintain the Sub-Adviser's registration as an
investment adviser under the Advisers Act, and such registration shall at all
times remain current, complete and in full compliance with all material
applicable provisions of the Advisers Act and the rules and regulations
thereunder;
(b) The Sub-Adviser's performance of its obligations under this Agreement
shall not conflict with any law, regulation or order to which the Sub-Adviser is
then subject;
(c) The Sub-Adviser shall at all times comply in all material respects with
the Advisers Act and the Investment Company Act, and all rules and
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regulations thereunder, and all other applicable laws and regulations, and the
Registration Statement, prospectus and any supplement and with any applicable
procedures adopted by the Fund's Board of Trustees, provided that such
procedures are substantially similar to those applicable to similar funds for
which the Board of Trustees of the Fund is responsible and that such procedures
are identified in writing to the Sub-Adviser;
(d) The Sub-Adviser shall promptly notify Adviser and the Fund upon the
occurrence of any event that might disqualify or prevent the Sub-Adviser from
performing its duties under this Agreement. The Sub-Adviser further agrees to
notify Adviser of any changes that would cause the Registration Statement or
prospectus for the Fund to contain any untrue statement of a material fact or to
omit to state a material fact which is required to be stated therein or is
necessary to make the statements contained therein not misleading, in each case
relating to Sub-Adviser and High Return Information; and
(e) For the entire time this Agreement is in effect and for a period of two
years thereafter, the Sub-Adviser shall maintain a claims made bond issued by a
reputable fidelity insurance company against larceny and embezzlement, covering
each officer and employee of Sub-Adviser, at a minimum level of $2 million which
provide coverage for acts or alleged acts which occurred during the period of
this Agreement.
7. Use of Names.
(a) The Sub-Adviser acknowledges and agrees that the names Kemper, Zurich
and Scudder, and abbreviations or logos associated with those names, are the
valuable property of Adviser and its affiliates; that the Fund, Adviser and
their affiliates have the right to use such names, abbreviations and logos; and
that the Sub-Adviser shall use the names Zurich, Kemper and Scudder, and
associated abbreviations and logos, only in connection with the Sub-Adviser's
performance of its duties hereunder. Further, in any communication with the
public and in any marketing communications of any sort, Sub-Adviser agrees to
obtain prior written approval from Adviser before using or referring to
Investors Fund Series, Kemper, Scudder, Zurich or [Kemper-Dreman Financial
Services Portfolio][Kemper-Dreman High Return Equity Portfolio] or any
abbreviations or logos associated with those names; provided that nothing herein
shall be deemed to prohibit the Sub-Adviser from referring to the performance of
the [Kemper-Dreman Financial Services Portfolio][Kemper-Dreman High Return
Equity Portfolio] in the Sub-Adviser's marketing material as long as such
marketing material does not constitute "sales literature" or "advertising" for
the [Financial Services Series][High Return Series], as those terms are used in
the rules, regulations and guidelines of the SEC and the National Association of
Securities Dealers, Inc.
(b) Adviser acknowledges that "Dreman" is distinctive in connection with
investment advisory and related services provided by the Sub-Adviser, the
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<PAGE> 85
"Dreman" name is a property right of the Sub-Adviser, and the "Dreman" name as
used in the name of the [Financial Services Series][High Return Series] is
understood to be used by the Fund upon the conditions hereinafter set forth;
provided that the Fund may use such name only so long as the Sub-Adviser shall
be retained as the investment sub-adviser of the [Financial Services Series]
[High Return Series] pursuant to the terms of this Agreement.
(c) Adviser acknowledges that the Fund and its agents may use the "Dreman"
name in the name of the [Financial Services Series][High Return Series] for the
period set forth herein in a manner not inconsistent with the interests of the
Sub-Adviser and that the rights of the Fund and its agents in the "Dreman" name
are limited to their use as a component of the [Financial Services Series][High
Return Series] name and in connection with accurately describing the activities
of the [Financial Services Series][High Return Series], including use with
marketing and other promotional and informational material relating to the
[Financial Services Series][High Return Series]. In the event that the
Sub-Adviser shall cease to be the investment sub-adviser of the [Financial
Services Series][High Return Series], then the Fund at its own or the Adviser's
expense, upon the Sub-Adviser's written request: (i) shall cease to use the Sub-
Adviser's name as part of the name of the [Financial Services Series][High
Return Series] or for any other commercial purpose (other than the right to
refer to the [Financial Services Series'][High Return Series'] former name in
the Fund's Registration Statement, proxy materials and other Fund documents to
the extent required by law and, for a reasonable period the use of the name in
informing others of the name change); and (ii) shall use its best efforts to
cause the Fund's officers and directors to take any and all actions which may be
necessary or desirable to effect the foregoing and to reconvey to the Sub-
Adviser all rights which the Fund may have to such name. Adviser agrees to take
any and all reasonable actions as may be necessary or desirable to effect the
foregoing and Sub-Adviser agrees to allow the Fund and its agents a reasonable
time to effectuate the foregoing.
(d) The Sub-Adviser hereby agrees and consents to the use of the Sub-
Adviser's name upon the foregoing terms and conditions.
8. Standard of Care. Except as may otherwise be required by law, and
except as may be set forth in paragraph 9, the Sub-Adviser shall not be liable
for any error of judgment or of law or for any loss suffered by the Fund, the
[Financial Services Series][High Return Series] 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. Indemnifications.
(a) The Sub-Adviser agrees to indemnify and hold harmless Adviser and the
Fund against any losses, expenses, claims, damages or liabilities (or actions or
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proceedings in respect thereof), to which Adviser or the Fund may become subject
arising out of or based on the breach or alleged breach by the Sub-Adviser of
any provisions of this Agreement or any wrongful action or alleged wrongful
action by the Sub-Adviser; provided, however, that the Sub-Adviser shall not be
liable under this paragraph in respect of any loss, expense, claim, damage or
liability to the extent that a court having jurisdiction shall have determined
by a final judgment, or independent counsel agreed upon by the Sub-Adviser and
the Adviser or the Fund, as the case may be, shall have concluded in a written
opinion, that such loss, expense, claim, damage or liability resulted primarily
from the Adviser's or the Fund's willful misfeasance, bad faith or gross
negligence or by reason of the reckless disregard by the Adviser or the Fund of
its duties. The foregoing indemnification shall be in addition to any rights
that the Adviser or the Fund may have at common law or otherwise. The
Sub-Adviser's agreements in this paragraph shall, upon the same terms and
conditions, extend to and inure to the benefit of each person who may be deemed
to control the Adviser or the Fund, be controlled by the Adviser or the Fund, or
be under common control with the Adviser or the Fund and their affiliates,
trustees, officers, employees and agents. The Sub-Adviser's agreement in this
paragraph shall also extend to any of the Fund's, [Financial Services
Series'][High Return Series'], and Adviser's successors or the successors of the
aforementioned affiliates, trustees, officers, employees or agents.
(b) The Adviser agrees to indemnify and hold harmless the Sub-Adviser
against any losses, expenses, claims, damages or liabilities (or actions or
proceedings in respect thereof), to which the Sub-Adviser may become subject
arising out of or based on the breach or alleged breach by the Adviser of any
provisions of this Agreement or the Management Agreement, or any wrongful action
or alleged wrongful action by the Adviser or its affiliates in the distribution
of the Fund's shares, or any wrongful action or alleged wrongful action by the
Fund other than wrongful action or alleged wrongful action that was caused by
the breach by Sub-Adviser of the provisions of this Agreement; provided,
however, that the Adviser shall not be liable under this paragraph in respect of
any loss, expense, claim, damage or liability to the extent that a court having
jurisdiction shall have determined by a final judgment, or independent counsel
agreed upon by the Adviser and the Sub-Adviser shall have concluded in a written
opinion, that such loss, expense, claim, damage or liability resulted primarily
from the Sub-Adviser's willful misfeasance, bad faith or gross negligence or by
reason of the reckless disregard by the Sub-Adviser of its duties. The foregoing
indemnification shall be in addition to any rights that the Sub-Adviser may have
at common law or otherwise. The Adviser's agreements in this paragraph shall,
upon the same terms and conditions, extend to and inure to the benefit of each
person who may be deemed to control the Sub-Adviser, be controlled by the
Sub-Adviser or be under common control with the Sub-Adviser and to each of the
Sub-Adviser's and each such person's respective affiliates, trustees, officers,
employees and agents. The Adviser's agreements in this paragraph shall also
extend to any of the Sub-Adviser's successors or the
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<PAGE> 87
successors of the aforementioned affiliates, trustees, officers, employees or
agents.
(c) Promptly after receipt by a party indemnified under paragraphs 9(a) and
9(b) above of notice of the commencement of any action, proceeding, or
investigation for which indemnification will be sought, such indemnified party
shall promptly notify the indemnifying party in writing; but the omission so to
notify the indemnifying party shall not relieve it from any liability which it
may otherwise have to any indemnified party unless such omission results in
actual material prejudice to the indemnifying party. In case any action or
proceeding shall be brought against any indemnified party, and it shall notify
the indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate in and, individually or jointly with any other
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of any action or
proceeding, the indemnifying party shall not be liable to the indemnified party
for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof other than reasonable costs of
investigation. If the indemnifying party does not elect to assume the defense of
any action or proceeding, the indemnifying party on a monthly basis shall
reimburse the indemnified party for the reasonable legal fees and other costs of
defense thereof. Regardless of whether or not the indemnifying party shall have
assumed the defense of any action or proceeding, the indemnified party shall not
settle or compromise the action or proceeding without the prior written consent
of the indemnifying party, which shall not be unreasonably withheld.
10. Survival. 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. Notices. 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. Governing Law. This Agreement shall be construed in accordance with
applicable federal law and the laws of the State of New York.
13. Miscellaneous.
(a) The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
(b) Terms not defined herein shall have the meaning set forth in the Fund's
prospectus.
(c) 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.
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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:
DREMAN VALUE MANAGEMENT, L.L.C.
By:
---------------------------------------------------
Title:
FOR THE PURPOSE OF ACCEPTING ITS
OBLIGATIONS UNDER SECTION 7 HEREIN ONLY
INVESTORS FUND SERIES
By:
---------------------------------------------------
Title:
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<PAGE> 89
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 90
EXHIBIT E
CURRENT FUNDAMENTAL INVESTMENT POLICIES
INVESTORS FUND SERIES
KEMPER BLUE CHIP PORTFOLIO
KEMPER CONTRARIAN VALUE PORTFOLIO
KEMPER GLOBAL BLUE CHIP PORTFOLIO
KEMPER GLOBAL INCOME PORTFOLIO
KEMPER GOVERNMENT SECURITIES PORTFOLIO
KEMPER GROWTH PORTFOLIO
KEMPER HIGH YIELD PORTFOLIO
KEMPER HORIZON 10+ PORTFOLIO
KEMPER HORIZON 20+ PORTFOLIO
KEMPER HORIZON 5 PORTFOLIO
KEMPER INTERNATIONAL GROWTH AND INCOME PORTFOLIO
KEMPER INTERNATIONAL PORTFOLIO
KEMPER INVESTMENT GRADE BOND PORTFOLIO
KEMPER MONEY MARKET PORTFOLIO
KEMPER SMALL CAP GROWTH PORTFOLIO
KEMPER SMALL CAP VALUE PORTFOLIO
KEMPER TOTAL RETURN PORTFOLIO
KEMPER VALUE+GROWTH PORTFOLIO
KEMPER-DREMAN FINANCIAL SERVICES PORTFOLIO
KEMPER-DREMAN HIGH RETURN EQUITY PORTFOLIO
The following fundamental investment restrictions apply to each of the KMMP,
KTRP, KHYP, KGP and KGSP except as indicated to the contrary. The Portfolio may
not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government or its agencies or
instrumentalities) if, as a result, more than five percent (5%) of the
Portfolio's total assets would be invested in securities of that issuer. For the
KHYP only, the restriction is as follows: "With respect to 75% of the
Portfolio's total assets, purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities) if, as a result, (a) more than 5% of the Portfolio's total
assets would be invested in the securities of that issuer, or (b) the Portfolio
would hold more than 10% of the outstanding voting securities of that issuer."
(2) Except for the KHYP, purchase more than ten percent (10%) of any class
of securities of any issuer. All debt securities and all preferred stocks are
each considered as one class.
(3) For the KMMP only, enter into repurchase agreements if, as a result
thereof, more than ten percent (10%) of the Portfolio's total assets valued at
the
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time of the transaction would be subject to repurchase agreements maturing in
more than seven (7) days.
(4) Make loans to others (except the purchase of debt obligations or
repurchase agreements or by lending its Portfolio securities) in accordance with
its objective and policies.
(5) Borrow money except from a bank as a temporary measure for
extraordinary or emergency purposes and then only in an amount up to one-third
( 1/3) of the value of its total assets, in order to meet redemption requests
without immediately selling any portfolio securities (any such borrowings under
this section will not be collateralized). If, for any reason, the current value
of the Portfolio's total assets falls below an amount equal to three (3) times
the amount of its indebtedness from money borrowed, the Portfolio will reduce,
within three (3) business days, its indebtedness to the extent necessary. The
Portfolio will not borrow for leverage purposes. The Portfolio will not purchase
any investments while borrowings are outstanding.
(6) Make short sales of securities or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the KTRP, KHYP, KGP and KGSP may make margin deposits
in connection with financial futures and options transactions.
(7) Concentrate more than 25% of a Portfolio's net assets in any one
industry; provided, however, that the KMMP intends, under normal conditions, to
invest more than 25% of its net assets in instruments issued by banks in
accordance with its investment objective and policies. There is no limitation in
respect to investments in obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities.
(8) For the KMMP only, invest more than five percent (5%) of the
Portfolio's total assets in securities restricted as to disposition under the
Federal securities laws.
(9) Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts; or in
real estate, although it may invest in securities which are secured by real
estate and securities of issuers which invest or deal in real estate; provided
that the KTRP, KHYP and KGP may purchase foreign currency on a spot basis (in
cash).
(10) Purchase securities of other investment companies, except as
permitted under the 1940 Act including in connection with a merger,
consolidation, reorganization or acquisition of assets.
(11) Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the Federal securities laws, in
connection with the disposition of portfolio securities.
(12) Issue senior securities except as permitted under the 1940 Act.
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(13) For the KMMP only, write, purchase or sell puts, calls or
combinations thereof.
(14) For the KTRP, KHYP and KGP only, engage in put or call option
transactions; except it may write (sell) put or call options on up to 25% of its
net assets and may purchase put and call options if no more than 5% of its net
assets would be invested in premiums on put and call options, combinations
thereof or similar options; and it may buy and sell options on financial futures
contracts.
The following fundamental investment restrictions apply to KIP. The Portfolio
may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States or any foreign government or their agencies or
instrumentalities) if, as a result, more than 5% of the Portfolio's total assets
would be invested in securities of that issuer. With respect to 75% of its
assets, the Portfolio will limit its investments in the securities of any one
foreign government issuer to 5% of the Portfolio's total assets.
(2) Purchase more than 10% of any class of securities of any issuer except
securities issued or guaranteed by the U.S. Government or any of its agencies or
instrumentalities. All debt securities are considered as one class and all
preferred stocks are considered as one class.
(3) Lend money provided that the making of time or demand deposits with
banks and the purchase of debt securities such as bonds, debentures, commercial
paper, repurchase agreements and short-term obligations in accordance with its
objective and policies are not prohibited.
(4) Borrow money except for temporary or emergency purposes (but not for
the purpose of purchase of investments) and then only in an amount not to exceed
5% of the Portfolio's net assets; or pledge the Portfolio's securities or
receivables or transfer or assign or otherwise encumber them in an amount
exceeding the amount of the borrowing secured thereby.
(5) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Portfolio may make margin deposits in connection
with financial futures and options transactions.
(6) Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Portfolio's net assets; nor may it purchase put
or call options if more than 5% of the Portfolio's net assets would be invested
in premiums on put and call options, combinations thereof or similar options;
however, the Portfolio may buy or sell options on financial futures contracts.
(7) Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry. This limitation shall not apply to obligations
issued by the U.S. Government or its agencies or instrumentalities.
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(8) Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts and may
enter into foreign currency transactions; or in real estate, although it may
invest in securities which are secured by real estate and securities of issuers
which invest or deal in real estate.
(9) Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization, or by
purchase in the open market of securities of closed-end investment companies
where no underwriter or dealer's commission or profit, other than customary
broker's commission, is involved and only if immediately thereafter not more
than (i) 3% of the total outstanding voting stock of such company is owned by
the Fund, (ii) 5% of the Fund's total assets would be invested in any one such
company, and (iii) 10% of the Fund's total assets would be invested in such
securities.
(10) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal securities laws,
in connection with the disposition of portfolio securities. The Fund may buy and
sell securities outside the United States which are not registered with the
Securities and Exchange Commission or marketable in the United States.
(11) Issue senior securities except as permitted under the 1940 Act.
The following fundamental investment restrictions apply to each of the KSCGP,
KIGBP, KCVP, KSCVP, KVGP, KH10P, KH20P and KH5P except as indicated to the
contrary. The Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or instrumentalities)
if, as a result, more than 5% of the Portfolio's total assets would be invested
in securities of that issuer; except that, for the KCVP and KSCVP, up to 25% of
each Portfolio's total assets may be invested without regard to these
limitations.
(2) Purchase more than 10% of the outstanding voting securities of any
issuer.
(3) Lend money or securities, provided that the making of time or demand
deposits with banks and the purchase of debt securities such as bonds,
debentures, commercial paper, repurchase agreements and short-term obligations
are not prohibited and the Portfolio may lend its portfolio securities.
(4) Borrow money except from a bank as a temporary measure for
extraordinary or emergency purposes and then only in an amount up to one-third
( 1/3) of the value of its total assets, in order to meet redemption requests
without immediately selling any portfolio securities (any such borrowings under
this section will not be collateralized). If, for any reason, the current value
of the Portfolio's total assets falls below an amount equal to three (3) times
the amount of its indebtedness from money borrowed, the Portfolio will reduce,
within three (3) business days, its indebtedness to the extent necessary. The
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Portfolio will not borrow for leverage purposes. The Portfolio will not purchase
any investments while borrowings are outstanding.
(5) Make short sales of securities, or purchase any securities on margin
except to obtain such short-term credits as may be necessary for the clearance
of transactions; however, the Portfolio may make margin deposits in connection
with financial futures and options transactions.
(6) For the KSCGP, KIGBP and KH10P, KH20P and KH5P only, write (sell) put
or call options, combinations thereof or similar options on more than 25% of the
Portfolio's net assets; nor may the Portfolio purchase put or call options if
more than 5% of the Portfolio's net assets would be invested in premiums on put
and call options, combinations thereof or similar options; however, the
Portfolio may buy or sell options on financial futures contracts.
(7) Concentrate 25% or more of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry.
(8) Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts; or in
real estate, although it may invest in securities which are secured by real
estate and securities of issuers which invest or deal in real estate.
(9) Underwrite securities issued by others except to the extent the Fund
may be deemed to be an underwriter, under the federal securities laws, in
connection with the disposition of portfolio securities.
(10) Issue senior securities except as permitted under the 1940 Act.
KBCP may not, as a fundamental policy:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result, more than 5% of the total value of the Portfolio's assets would be
invested in securities of that issuer.
(2) Purchase more than 10% of any class of voting securities of any
issuer.
(3) Make loans to others provided that the Portfolio may purchase debt
obligations or repurchase agreements, and it may lend its securities in
accordance with its investment objective and policies.
(4) Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Portfolio's total assets falls below an amount equal to three times the amount
of its indebtedness from money borrowed, the Portfolio will, within three days
(not including Sundays and holidays), reduce its indebtedness to the extent
neces-
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sary. The Portfolio will not borrow for leverage purposes and will not purchase
securities or make investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction
number (4) above. (The collateral arrangements with respect to options,
financial futures and delayed delivery transactions and any margin payments in
connection therewith are not deemed to be pledges or other encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the
Portfolio may make margin deposits in connection with options and financial
futures transactions.
(7) Make short sales of securities or maintain a short position for the
account of the Portfolio unless at all times when a short position is open it
owns an equal amount of such securities or owns securities which, without
payment of any further consideration, are convertible into or exchangeable for
securities of the same issue as, and equal in amount to, the securities sold
short and unless not more than 10% of the Portfolio's total assets is held as
collateral for such sales at any one time.
(8) Write (sell) put or call options, combinations thereof or similar
options; nor may it purchase put or call options if more than 5% of the
Portfolio's net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Portfolio may buy or sell
options on financial futures contracts.
(9) Purchase securities (other than securities of the U.S. Government, its
agencies or instrumentalities) if as a result of such purchase 25% or more of
the Portfolio's total assets would be invested in any one industry.
(10) Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnership interests), although it may invest in securities
which are secured by real estate and securities of issuers which invest or deal
in real estate.
(11) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal securities laws,
in connection with the disposition of portfolio securities.
(12) Issue senior securities except as permitted under the Investment
Company Act of 1940.
KGIP may not, as a fundamental policy:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if, as a
result,
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more than 5% of the total value of the Portfolio's assets would be invested in
securities of that issuer except that, with respect to 50% of the Portfolio's
total assets, the Portfolio may invest up to 25% of its total assets in
securities of any one issuer.
(2) Purchase more than 10% of any class of voting securities of any
issuer.
(3) Make loans to others provided that the Portfolio may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objective and policies.
(4) Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value of
its total assets, in order to meet redemption requests without immediately
selling any portfolio securities. If, for any reason, the current value of the
Portfolio's total assets falls below an amount equal to three times the amount
of its indebtedness from money borrowed, the Portfolio will, within three days
(not including Sundays and holidays), reduce its indebtedness to the extent
necessary. The Portfolio will not borrow for leverage purposes and will not
purchase securities or make investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15% of
its total assets and then only to secure borrowings permitted by restriction 4
above. (The collateral arrangements with respect to options, financial futures
and delayed delivery transactions and any margin payments in connection
therewith are not deemed to be pledges or other encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the
Portfolio may make margin deposits in connection with options and financial
futures transactions.
(7) Make short sales of securities or other assets or maintain a short
position for the account of the Portfolio unless at all times when a short
position is open it owns an equal amount of such securities or other assets or
owns securities which, without payment of any further consideration, are
convertible into or exchangeable for securities or other assets of the same
issue as, and equal in amount to, the securities or other assets sold short and
unless not more than 10% of the Portfolio's total assets is held as collateral
for such sales at any one time.
(8) Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Portfolio's net assets; nor may the Portfolio
purchase put or call options if more than 5% of the Portfolio's net assets would
be invested in premiums on put and call options, combinations thereof or similar
options; however, the Portfolio may buy or sell options on financial futures
contracts.
(9) Purchase securities (other than securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities) if as a result of such
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purchase 25% or more of the Portfolio's total assets would be invested in any
one industry.
(10) Invest in commodities or commodity futures contracts, although it may
buy or sell financial futures contracts and options on such contracts, and
engage in foreign currency transactions; or in real estate (including real
estate limited partnerships), although it may invest in securities which are
secured by real estate and securities of issuers which invest or deal in real
estate including real estate investment trusts
(11) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal securities laws,
in connection with the disposition of portfolio securities.
(12) Issue senior securities except as permitted under the Investment
Company Act of 1940.
KDHRP may not, as a fundamental policy:
(1) Purchase securities of any one issuer other than obligations issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
(collectively "U.S. Government Securities") if immediately thereafter more than
5% of its total assets would be invested in the securities of any one issuer, or
purchase more than 10% of an issuer's outstanding securities, except that up to
25% of the Portfolio's total assets may be invested without regard to these
limitations.
(2) Borrow money or issue senior securities, except that the Portfolio may
borrow from banks for temporary purposes in amounts not in excess of 10% of the
value of its total assets at the time of such borrowing; or mortgage, pledge, or
hypothecate any assets except in connection with any such borrowing in amounts
not in excess of the lesser of the amount borrowed or 10% of the value of its
total assets at the time of such borrowing; provided that the Portfolio may
enter into futures contracts and related options as described in the prospectus.
Optioned securities are not considered to be pledged for purposes of this
limitation.
(3) Purchase any securities which would cause more than 25% of the value
of its total assets at the time of purchase to be invested in the securities of
issuers conducting their principal activities in the same industry.
(4) Make loans, except that the Portfolio may lend securities it owns as
described herein and enter into repurchase agreements pursuant to its investment
objective and policies.
(5) Purchase securities on margin or make short sales of securities,
provided that the Portfolio may enter into futures contracts and related options
and make initial and variation margin deposits in connection therewith.
(6) Purchase or sell commodities or commodity contracts, except futures
contracts and options thereon as stated in the prospectus, or invest in oil, gas
or mineral exploration or development programs, or in real estate or mortgage
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loans provided that the Portfolio may, to the extent appropriate to its
investment objective, purchase publicly traded securities of companies engaging
in whole or in part in such activities.
(7) Engage in the business of underwriting securities issued by others,
except that the Portfolio may acquire securities which are subject to
restrictions on disposition ("restricted securities") within the meaning of the
Securities Act of 1933.
KDFSP may not, as a fundamental policy:
(1) Borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction from time to
time.
(2) Issue senior securities, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction, from time
to time.
(3) Purchase physical commodities or contracts relating to physical
commodities.
(4) Engage in the business of underwriting securities issued by others,
except to the extent that the Portfolio may be deemed to be an underwriter in
connection with the disposition of portfolio securities.
(5) Purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that the Portfolio reserves freedom of
action to hold and to sell real estate acquired as a result of the Portfolio's
ownership of securities.
(6) Make loans to other persons except (i) loans of portfolio securities,
and (ii) to the extent that entry into repurchase agreements and the purchase of
debt instruments or interests in indebtedness in accordance with the Portfolio's
objective and policies may be deemed to be loans.
(7) Concentrate its investments in a particular industry, as that term is
used in the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time, except that the Portfolio may
concentrate its investments in the financial services industry.
The following fundamental investment restrictions apply to each of the
KGBCP and KIGIP. Each portfolio may not:
(1) Borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction from time to
time.
(2) Issue senior securities, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction, from time
to time.
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(3) Purchase physical commodities or contracts relating to physical
commodities.
(4) Engage in the business of underwriting securities issued by others,
except to the extent that a Portfolio may be deemed to be an underwriter in
connection with the disposition of portfolio securities.
(5) Purchase or sell real estate, which term does not include securities
of companies which deal in real estate or mortgages or investments secured by
real estate or interests therein, except that a Portfolio reserves freedom of
action to hold and to sell real estate acquired as a result of the Portfolio's
ownership of securities.
(6) Make loans to other persons except (i) loans of portfolio securities,
and (ii) to the extent that entry into repurchase agreements and the purchase of
debt instruments or interests in indebtedness in accordance with a Portfolio's
investment objective and policies may be deemed to be loans.
(7) Concentrate its investments in a particular industry, as that term is
used in the 1940 Act, and as interpreted or modified by regulatory authority
having jurisdiction, from time to time.
The following fundamental investment restrictions apply to each of the
KMMP, KTRP, KHYP, KGP and KGSP except as indicated to the contrary. The
Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government or its agencies or
instrumentalities) if, as a result, more than five percent (5%) of the
Portfolio's total assets would be invested in securities of that issuer.
For the KHYP only, the restriction is as follows: "With respect to 75% of
the Portfolio's total assets, purchase the securities of any issuer (other
than securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities) if, as a result, (a) more than 5% of the
Portfolio's total assets would be invested in the securities of that
issuer, or (b) the Portfolio would hold more than 10% of the outstanding
voting securities of that issuer."
(2) Except for the KHYP, purchase more than ten percent (10%) of any
class of securities of any issuer. All debt securities and all preferred
stocks are each considered as one class.
(3) For the KMMP only, enter into repurchase agreements if, as a
result thereof, more than ten percent (10%) of the Portfolio's total assets
valued at the time of the transaction would be subject to repurchase
agreements maturing in more than seven (7) days.
(4) Make loans to others (except the purchase of debt obligations or
repurchase agreements or by lending its Portfolio securities) in accordance
with its objective and policies.
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<PAGE> 100
(5) Borrow money except from a bank as a temporary measure for
extraordinary or emergency purposes and then only in an amount up to
one-third (1/3) of the value of its total assets, in order to meet
redemption requests without immediately selling any portfolio securities
(any such borrowings under this section will not be collateralized). If,
for any reason, the current value of the Portfolio's total assets falls
below an amount equal to three (3) times the amount of its indebtedness
from money borrowed, the Portfolio will reduce, within three (3) business
days, its indebtedness to the extent necessary. The Portfolio will not
borrow for leverage purposes. The Portfolio will not purchase any
investments while borrowings are outstanding.
(6) Make short sales of securities or purchase any securities on
margin except to obtain such short-term credits as may be necessary for the
clearance of transactions; however, the KTRP, KHYP, KGP and KGSP may make
margin deposits in connection with financial futures and options
transactions.
(7) Concentrate more than 25% of a Portfolio's net assets in any one
industry; provided, however, that the KMMP intends, under normal
conditions, to invest more than 25% of its net assets in instruments issued
by banks in accordance with its investment objective and policies. There is
no limitation in respect to investments in obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities.
(8) For the KMMP only, invest more than five percent (5%) of the
Portfolio's total assets in securities restricted as to disposition under
the Federal securities laws.
(9) Invest in commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts;
or in real estate, although it may invest in securities which are secured
by real estate and securities of issuers which invest or deal in real
estate; provided that the KTRP, KHYP and KGP may purchase foreign currency
on a spot basis (in cash).
(10) Purchase securities of other investment companies, except as
permitted under the 1940 Act including in connection with a merger,
consolidation, reorganization or acquisition of assets.
(11) Underwrite securities issued by others except to the extent the
Fund may be deemed to be an underwriter, under the Federal securities laws,
in connection with the disposition of portfolio securities.
(12) Issue senior securities except as permitted under the 1940 Act.
(13) For the KMMP only, write, purchase or sell puts, calls or
combinations thereof.
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<PAGE> 101
(14) For the KTRP, KHYP and KGP only, engage in put or call option
transactions; except it may write (sell) put or call options on up to 25%
of its net assets and may purchase put and call options if no more than 5%
of its net assets would be invested in premiums on put and call options,
combinations thereof or similar options; and it may buy and sell options on
financial futures contracts.
The following fundamental investment restrictions apply to KIP. The
Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States or any foreign government or their
agencies or instrumentalities) if, as a result, more than 5% of the
Portfolio's total assets would be invested in securities of that issuer.
With respect to 75% of its assets, the Portfolio will limit its investments
in the securities of any one foreign government issuer to 5% of the
Portfolio's total assets.
(2) Purchase more than 10% of any class of securities of any issuer
except securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities. All debt securities are considered as one
class and all preferred stocks are considered as one class.
(3) Lend money provided that the making of time or demand deposits
with banks and the purchase of debt securities such as bonds, debentures,
commercial paper, repurchase agreements and short-term obligations in
accordance with its objective and policies are not prohibited.
(4) Borrow money except for temporary or emergency purposes (but not
for the purpose of purchase of investments) and then only in an amount not
to exceed 5% of the Portfolio's net assets; or pledge the Portfolio's
securities or receivables or transfer or assign or otherwise encumber them
in an amount exceeding the amount of the borrowing secured thereby.
(5) Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be necessary for the
clearance of transactions; however, the Portfolio may make margin deposits
in connection with financial futures and options transactions.
(6) Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Portfolio's net assets; nor may it purchase
put or call options if more than 5% of the Portfolio's net assets would be
invested in premiums on put and call options, combinations thereof or
similar options; however, the Portfolio may buy or sell options on
financial futures contracts.
(7) Concentrate more than 25% of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry. This limitation shall not apply to
obligations issued by the U.S. Government or its agencies or
instrumentalities.
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<PAGE> 102
(8) Invest in commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts
and may enter into foreign currency transactions; or in real estate,
although it may invest in securities which are secured by real estate and
securities of issuers which invest or deal in real estate.
(9) Purchase securities of other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization, or
by purchase in the open market of securities of closed-end investment
companies where no underwriter or dealer's commission or profit, other than
customary broker's commission, is involved and only if immediately
thereafter not more than (i) 3% of the total outstanding voting stock of
such company is owned by the Fund, (ii) 5% of the Fund's total assets would
be invested in any one such company, and (iii) 10% of the Fund's total
assets would be invested in such securities.
(10) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal securities
laws, in connection with the disposition of portfolio securities. The Fund
may buy and sell securities outside the United States which are not
registered with the Securities and Exchange Commission or marketable in the
United States.
(11) Issue senior securities except as permitted under the 1940 Act.
The following fundamental investment restrictions apply to each of the
KSCGP, KIGBP, KCVP, KSCVP, KVGP, KH10P, KH20P and KH5P except as indicated to
the contrary. The Portfolio may not:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the Portfolio's total
assets would be invested in securities of that issuer; except that, for the
KCVP and KSCVP, up to 25% of each Portfolio's total assets may be invested
without regard to these limitations.
(2) Purchase more than 10% of the outstanding voting securities of any
issuer.
(3) Lend money or securities, provided that the making of time or
demand deposits with banks and the purchase of debt securities such as
bonds, debentures, commercial paper, repurchase agreements and short-term
obligations are not prohibited and the Portfolio may lend its portfolio
securities.
(4) Borrow money except from a bank as a temporary measure for
extraordinary or emergency purposes and then only in an amount up to
one-third (1/3) of the value of its total assets, in order to meet
redemption requests without immediately selling any portfolio securities
(any such borrowings under this section will not be collateralized). If,
for any reason,
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<PAGE> 103
the current value of the Portfolio's total assets falls below an amount
equal to three (3) times the amount of its indebtedness from money
borrowed, the Portfolio will reduce, within three (3) business days, its
indebtedness to the extent necessary. The Portfolio will not borrow for
leverage purposes. The Portfolio will not purchase any investments while
borrowings are outstanding.
(5) Make short sales of securities, or purchase any securities on
margin except to obtain such short-term credits as may be necessary for the
clearance of transactions; however, the Portfolio may make margin deposits
in connection with financial futures and options transactions.
(6) For the KSCGP, KIGBP and KH10P, KH20P and KH5P only, write (sell)
put or call options, combinations thereof or similar options on more than
25% of the Portfolio's net assets; nor may the Portfolio purchase put or
call options if more than 5% of the Portfolio's net assets would be
invested in premiums on put and call options, combinations thereof or
similar options; however, the Portfolio may buy or sell options on
financial futures contracts.
(7) Concentrate 25% or more of the value of its assets in any one
industry. Water, communications, electric and gas utilities shall each be
considered a separate industry.
(8) Invest in commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts;
or in real estate, although it may invest in securities which are secured
by real estate and securities of issuers which invest or deal in real
estate.
(9) Underwrite securities issued by others except to the extent the
Fund may be deemed to be an underwriter, under the federal securities laws,
in connection with the disposition of portfolio securities.
(10) Issue senior securities except as permitted under the 1940 Act.
KBCP may not, as a fundamental policy:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if,
as a result, more than 5% of the total value of the Portfolio's assets
would be invested in securities of that issuer.
(2) Purchase more than 10% of any class of voting securities of any
issuer.
(3) Make loans to others provided that the Portfolio may purchase debt
obligations or repurchase agreements, and it may lend its securities in
accordance with its investment objective and policies.
(4) Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the
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<PAGE> 104
value of its total assets, in order to meet redemption requests without
immediately selling any portfolio securities. If, for any reason, the
current value of the Portfolio's total assets falls below an amount equal
to three times the amount of its indebtedness from money borrowed, the
Portfolio will, within three days (not including Sundays and holidays),
reduce its indebtedness to the extent necessary. The Portfolio will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15%
of its total assets and then only to secure borrowings permitted by
restriction number (4) above. (The collateral arrangements with respect to
options, financial futures and delayed delivery transactions and any margin
payments in connection therewith are not deemed to be pledges or other
encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the
Portfolio may make margin deposits in connection with options and financial
futures transactions.
(7) Make short sales of securities or maintain a short position for
the account of the Portfolio unless at all times when a short position is
open it owns an equal amount of such securities or owns securities which,
without payment of any further consideration, are convertible into or
exchangeable for securities of the same issue as, and equal in amount to,
the securities sold short and unless not more than 10% of the Portfolio's
total assets is held as collateral for such sales at any one time.
(8) Write (sell) put or call options, combinations thereof or similar
options; nor may it purchase put or call options if more than 5% of the
Portfolio's net assets would be invested in premiums on put and call
options, combinations thereof or similar options; however, the Portfolio
may buy or sell options on financial futures contracts.
(9) Purchase securities (other than securities of the U.S. Government,
its agencies or instrumentalities) if as a result of such purchase 25% or
more of the Portfolio's total assets would be invested in any one industry.
(10) Invest in commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts,
and engage in foreign currency transactions; or in real estate (including
real estate limited partnership interests), although it may invest in
securities which are secured by real estate and securities of issuers which
invest or deal in real estate.
(11) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal securities
laws, in connection with the disposition of portfolio securities.
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<PAGE> 105
(12) Issue senior securities except as permitted under the Investment
Company Act of 1940.
KGIP may not, as a fundamental policy:
(1) Purchase securities of any issuer (other than obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities) if,
as a result, more than 5% of the total value of the Portfolio's assets
would be invested in securities of that issuer except that, with respect to
50% of the Portfolio's total assets, the Portfolio may invest up to 25% of
its total assets in securities of any one issuer.
(2) Purchase more than 10% of any class of voting securities of any
issuer.
(3) Make loans to others provided that the Portfolio may purchase debt
obligations or repurchase agreements and it may lend its securities in
accordance with its investment objective and policies.
(4) Borrow money except as a temporary measure for extraordinary or
emergency purposes, and then only in an amount up to one-third of the value
of its total assets, in order to meet redemption requests without
immediately selling any portfolio securities. If, for any reason, the
current value of the Portfolio's total assets falls below an amount equal
to three times the amount of its indebtedness from money borrowed, the
Portfolio will, within three days (not including Sundays and holidays),
reduce its indebtedness to the extent necessary. The Portfolio will not
borrow for leverage purposes and will not purchase securities or make
investments while borrowings are outstanding.
(5) Pledge, hypothecate, mortgage or otherwise encumber more than 15%
of its total assets and then only to secure borrowings permitted by
restriction 4 above. (The collateral arrangements with respect to options,
financial futures and delayed delivery transactions and any margin payments
in connection therewith are not deemed to be pledges or other
encumbrances.)
(6) Purchase securities on margin, except to obtain such short-term
credits as may be necessary for the clearance of transactions; however, the
Portfolio may make margin deposits in connection with options and financial
futures transactions.
(7) Make short sales of securities or other assets or maintain a short
position for the account of the Portfolio unless at all times when a short
position is open it owns an equal amount of such securities or other assets
or owns securities which, without payment of any further consideration, are
convertible into or exchangeable for securities or other assets of the same
issue as, and equal in amount to, the securities or other assets sold short
and unless not more than 10% of the Portfolio's total assets is held as
collateral for such sales at any one time.
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<PAGE> 106
(8) Write or sell put or call options, combinations thereof or similar
options on more than 25% of the Portfolio's net assets; nor may the
Portfolio purchase put or call options if more than 5% of the Portfolio's
net assets would be invested in premiums on put and call options,
combinations thereof or similar options; however, the Portfolio may buy or
sell options on financial futures contracts.
(9) Purchase securities (other than securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities) if as a result of
such purchase 25% or more of the Portfolio's total assets would be invested
in any one industry.
(10) Invest in commodities or commodity futures contracts, although it
may buy or sell financial futures contracts and options on such contracts,
and engage in foreign currency transactions; or in real estate (including
real estate limited partnerships), although it may invest in securities
which are secured by real estate and securities of issuers which invest or
deal in real estate including real estate investment trusts
(11) Underwrite securities issued by others except to the extent the
Portfolio may be deemed to be an underwriter, under the federal securities
laws, in connection with the disposition of portfolio securities.
(12) Issue senior securities except as permitted under the Investment
Company Act of 1940.
KDHRP may not, as a fundamental policy:
(1) Purchase securities of any one issuer other than obligations
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities (collectively "U.S. Government Securities") if
immediately thereafter more than 5% of its total assets would be invested
in the securities of any one issuer, or purchase more than 10% of an
issuer's outstanding securities, except that up to 25% of the Portfolio's
total assets may be invested without regard to these limitations.
(2) Borrow money or issue senior securities, except that the Portfolio
may borrow from banks for temporary purposes in amounts not in excess of
10% of the value of its total assets at the time of such borrowing; or
mortgage, pledge, or hypothecate any assets except in connection with any
such borrowing in amounts not in excess of the lesser of the amount
borrowed or 10% of the value of its total assets at the time of such
borrowing; provided that the Portfolio may enter into futures contracts and
related options as described in the prospectus. Optioned securities are not
considered to be pledged for purposes of this limitation.
(3) Purchase any securities which would cause more than 25% of the
value of its total assets at the time of purchase to be invested in the
securities of issuers conducting their principal activities in the same
industry.
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<PAGE> 107
(4) Make loans, except that the Portfolio may lend securities it owns
as described herein and enter into repurchase agreements pursuant to its
investment objective and policies.
(5) Purchase securities on margin or make short sales of securities,
provided that the Portfolio may enter into futures contracts and related
options and make initial and variation margin deposits in connection
therewith.
(6) Purchase or sell commodities or commodity contracts, except
futures contracts and options thereon as stated in the prospectus, or
invest in oil, gas or mineral exploration or development programs, or in
real estate or mortgage loans provided that the Portfolio may, to the
extent appropriate to its investment objective, purchase publicly traded
securities of companies engaging in whole or in part in such activities.
(7) Engage in the business of underwriting securities issued by
others, except that the Portfolio may acquire securities which are subject
to restrictions on disposition ("restricted securities") within the meaning
of the Securities Act of 1933.
KDFSP may not, as a fundamental policy:
(1) Borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction from
time to time.
(2) Issue senior securities, except as permitted under the 1940 Act
and as interpreted or modified by regulatory authority having jurisdiction,
from time to time.
(3) Purchase physical commodities or contracts relating to physical
commodities.
(4) Engage in the business of underwriting securities issued by
others, except to the extent that the Portfolio may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(5) Purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages or
investments secured by real estate or interests therein, except that the
Portfolio reserves freedom of action to hold and to sell real estate
acquired as a result of the Portfolio's ownership of
securities.
(6) Make loans to other persons except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase agreements
and the purchase of debt instruments or interests in indebtedness in
accordance with the Portfolio's objective and policies may be deemed to be
loans.
(7) Concentrate its investments in a particular industry, as that term
is used in the 1940 Act, and as interpreted or modified by regulatory
authority
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<PAGE> 108
having jurisdiction, from time to time, except that the Portfolio may
concentrate its investments in the financial services industry.
The following fundamental investment restrictions apply to each of the
KGBCP and KIGIP. Each portfolio may not:
(1) Borrow money, except as permitted under the 1940 Act and as
interpreted or modified by regulatory authority having jurisdiction from
time to time.
(2) Issue senior securities, except as permitted under the 1940 Act
and as interpreted or modified by regulatory authority having jurisdiction,
from time to time.
(3) Purchase physical commodities or contracts relating to physical
commodities.
(4) Engage in the business of underwriting securities issued by
others, except to the extent that a Portfolio may be deemed to be an
underwriter in connection with the disposition of portfolio securities.
(5) Purchase or sell real estate, which term does not include
securities of companies which deal in real estate or mortgages or
investments secured by real estate or interests therein, except that a
Portfolio reserves freedom of action to hold and to sell real estate
acquired as a result of the Portfolio's ownership of securities.
(6) Make loans to other persons except (i) loans of portfolio
securities, and (ii) to the extent that entry into repurchase agreements
and the purchase of debt instruments or interests in indebtedness in
accordance with a Portfolio's investment objective and policies may be
deemed to be loans.
(7) Concentrate its investments in a particular industry, as that term
is used in the 1940 Act, and as interpreted or modified by regulatory
authority having jurisdiction, from time to time.
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<PAGE> 110
APPENDIX 1
TRUST and Portfolios
INVESTORS FUND SERIES ("IFS")
Kemper Blue Chip Portfolio ("KBCP")
Kemper Contrarian Value Portfolio ("KCVP")
Kemper Global Blue Chip Portfolio ("KGBCP")
Kemper Global Income Portfolio ("KGIP")
Kemper Government Securities Portfolio ("KGSP")
Kemper Growth Portfolio ("KGP")
Kemper High Yield Portfolio ("KHYP")
Kemper Horizon 10+ Portfolio ("KH10P")
Kemper Horizon 20+ Portfolio ("KH20P")
Kemper Horizon 5 Portfolio ("KH5P")
Kemper International Growth and Income Portfolio ("KIGIP")
Kemper International Portfolio ("KIP")
Kemper Investment Grade Bond Portfolio ("KIGBP")
Kemper Money Market Portfolio ("KMMP")
Kemper Small Cap Growth Portfolio ("KSCGP")
Kemper Small Cap Value Portfolio ("KSCVP")
Kemper Total Return Portfolio ("KTRP")
Kemper Value+Growth Portfolio ("KVGP")
Kemper-Dreman Financial Services Portfolio ("KDFSP")
Kemper-Dreman High Return Equity Portfolio ("KDHRP")
<PAGE> 111
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<PAGE> 112
APPENDIX 2
FUND SHARES OUTSTANDING
Holders of record of the shares of each Fund at the close of business on
September 22, 1998 (the "Record Date"), as to any matter on which they are
entitled to vote, will be entitled to one vote per share on all business of the
Special Meeting. The table below sets forth the number of shares outstanding for
each Fund as of June 30, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
OUTSTANDING
FUND AS OF JUNE 30, 1998
---- -------------------
<S> <C>
Kemper Blue Chip Portfolio 38,861,736.011
Kemper Contrarian Value Portfolio 140,328,491.490
Kemper Global Blue Chip Portfolio 882,870.596
Kemper Global Income Portfolio 4,523,413.200
Kemper Government Securities Portfolio 82,016,372.766
Kemper Growth Portfolio 219,691,154.740
Kemper High Yield Portfolio 373,291,474.148
Kemper Horizon 10+ Portfolio 27,766,278.462
Kemper Horizon 20+ Portfolio 19,474,278.092
Kemper Horizon 5 Portfolio 18,979,180.880
Kemper International Growth and Income Portfolio 861,038.287
Kemper International Portfolio 130,880,349.760
Kemper Investment Grade Bond Portfolio 24,391,608.680
Kemper Money Market Portfolio 102,922,130.100
Kemper Small Cap Growth Portfolio 96,642,637.980
Kemper Small Cap Value Portfolio 83,458,385.700
Kemper Total Return Portfolio 325,014,953.107
Kemper Value+Growth Portfolio 77,750,188.350
Kemper-Dreman Financial Services Portfolio 5,008,014.670
Kemper-Dreman High Return Equity Portfolio 11,337,243.785
</TABLE>
<PAGE> 113
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<PAGE> 114
APPENDIX 3
BENEFICIAL OWNERS OF 5% OR MORE OF FUND SHARES(+)
As of June 30, 1998, 3,016,160 shares in the aggregate, or 8% of the
outstanding shares of KBCP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 35,844,737 shares in the aggregate, or 92% of the
outstanding shares of KBCP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 382,870.596 shares in the aggregate, or 43% of the
outstanding shares of KGBCP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 500,000 shares in the aggregate, or 57% of the
outstanding shares of KGBCP, were held in the name of SS&C Investment
Corporation, an affiliate of Scudder Kemper Investments, Inc., and represent the
required initial capitalization of the Portfolio.
As of June 30, 1998, 1,465,314 shares in the aggregate, or 32% of the
outstanding shares of KGIP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 3,059,803 shares in the aggregate, or 68% of the
outstanding shares of KGIP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 197,838,889 shares in the aggregate, or 91% of the
outstanding shares of KGP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 21,756,767 shares in the aggregate, or 10% of the
outstanding shares of KGP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
<PAGE> 115
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 64,674,984 shares in the aggregate, or 79% of the
outstanding shares of KGSP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 17,197,469 shares in the aggregate, or 21% of the
outstanding shares of KGSP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 8,527,386 shares in the aggregate, or 31% of the
outstanding shares of KH10P, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 19,531,644 shares in the aggregate, or 70% of the
outstanding shares of KH10P, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 5,369,626 shares in the aggregate, or 28% of the
outstanding shares of KH20P, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 14,049,252 shares in the aggregate, or 72% of the
outstanding shares of KH20P, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 5,250,993 shares in the aggregate, or 28% of the
outstanding shares of KH5P, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 13,770,378 shares in the aggregate, or 73% of the
outstanding shares of KH5P, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
2
<PAGE> 116
As of June 30, 1998, 241,771,210 shares in the aggregate, or 65% of the
outstanding shares of KHYP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 125,578,782 shares in the aggregate, or 34% of the
outstanding shares of KHYP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 5,879,671 shares in the aggregate, or 24% of the
outstanding shares of KIGBP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 18,580,165 shares in the aggregate, or 76% of the
outstanding shares of KIGBP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 341,090.248 shares in the aggregate, or 40% of the
outstanding shares of KIGIP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 500,000 shares in the aggregate, or 60% of the
outstanding shares of KIGIP, were held in the name of SS&C Investment
Corporation, an affiliate of Scudder Kemper Investments, Inc., and represent the
required initial capitalization of the Portfolio.
As of June 30, 1998, 95,571,981 shares in the aggregate, or 73% of the
outstanding shares of KIP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 35,329,206 shares in the aggregate, or 27% of the
outstanding shares of KIP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 78,147,350 shares in the aggregate, or 76% of the
outstanding shares of KMMP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may
3
<PAGE> 117
be deemed to be the beneficial owner of certain of these shares, but disclaims
any beneficial ownership therein.
As of June 30, 1998, 23,783,636 shares in the aggregate, or 23% of the
outstanding shares of KMMP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 72,372,455 shares in the aggregate, or 75% of the
outstanding shares of KSCGP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 24,065,120 shares in the aggregate, or 25% of the
outstanding shares of KSCGP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 31,316,902 shares in the aggregate, or 38% of the
outstanding shares of KSCVP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 51,314,517 shares in the aggregate, or 61% of the
outstanding shares of KSCVP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 293,188,352 shares in the aggregate, or 90% of the
outstanding shares of KTRP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 31,842,684 shares in the aggregate, or 10% of the
outstanding shares of KTRP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 26,163,250 shares in the aggregate, or 34% of the
outstanding shares of KVGP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
4
<PAGE> 118
As of June 30, 1998, 51,669,917 shares in the aggregate, or 66% of the
outstanding shares of KVGP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 54,071,794 shares in the aggregate, or 39% of the
outstanding shares of KCVP, were held in the name of Kemper Investors Life
Insurance Company, One Kemper Drive, Long Grove, Illinois 60049, who may be
deemed to be the beneficial owner of certain of these shares, but disclaims any
beneficial ownership therein.
As of June 30, 1998, 86,299,733 shares in the aggregate, or 61% of the
outstanding shares of KCVP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 4,462,504.566 shares in the aggregate, or 89% of the
outstanding shares of KDFSP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
As of June 30, 1998, 500,000 shares in the aggregate, or 11% of the
outstanding shares of KDFSP, were held in the name of SS&C Investment
Corporation, an affiliate of Scudder Kemper Investments, Inc., and represents
the required initial capitalization of the Portfolio.
As of June 30, 1998, 10,738,439.344 shares in the aggregate, or 95% of the
outstanding shares of KDHRP, were held in the name of Allmerica Financial Life
Insurance and Annuity Company, 440 Lincoln Street, Worcester, Massachusetts
01653, who may be deemed to be the beneficial owner of certain of these shares,
but disclaims any beneficial ownership therein.
- ---------------
(+) Percentage amounts provided below have, where applicable, been rounded up to
the nearest percentage.
5
<PAGE> 119
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 120
APPENDIX 4
FUND MANAGEMENT FEE RATES, NET ASSETS
AND AGGREGATE MANAGEMENT FEES
<TABLE>
<CAPTION>
AGGREGATE
MANAGEMENT
FUND FISCAL YEAR NET ASSETS MANAGEMENT FEE RATE+ FEE PAID++
---- ----------- ---------- -------------------- ----------
<S> <C> <C> <C> <C>
Kemper Blue Chip Portfolio(@) 12/31/97 $ 18,421,000 0.650 of 1% of average daily $ 27,000
net assets
Kemper Contrarian Value 12/31/97 $162,380,000 0.750 of 1% of average daily $ 604,000
Portfolio net assets
Kemper Global Blue Chip N/A(+) N/A(+) 1.00% of first $250 million N/A(+)
Portfolio of average daily net assets;
0.95 of 1% of next $750
million; 0.90 of 1% on assets
over $1 billion
Kemper Global Income 12/31/97 $ 2,145,000 0.750 of 1% of average daily $ 9,000
Portfolio(@) net assets
Kemper Government Securities 12/31/97 $ 86,682,000 0.550 of 1% of average daily $ 460,000
Portfolio net assets
Kemper Growth Portfolio 12/31/97 $563,016,000 0.600 of 1% of average daily $3,142,000
net assets
Kemper High Yield Portfolio 12/31/97 $391,664,000 0.600 of 1% of average daily $1,991,000
net assets
Kemper Horizon 10+ Portfolio 12/31/97 $ 22,553,000 0.600 of 1% of average daily $ 77,000
net assets
Kemper Horizon 20+ Portfolio 12/31/97 $ 16,659,000 0.600 of 1% of average daily $ 56,000
net assets
Kemper Horizon 5 Portfolio 12/31/97 $ 14,258,000 0.600 of 1% of average daily $ 44,000
net assets
Kemper International Growth N/A(+) N/A(+) 1.00% of average daily net N/A(+)
and Income Portfolio assets
Kemper International 12/31/97 $200,046,000 0.750 of 1% of average daily $1,419,000
Portfolio net assets
Kemper Investment Grade Bond 12/31/97 $ 15,504,000 0.600 of 1% of average daily $ 46,000
Portfolio net assets
Kemper Money Market Portfolio 12/31/97 $100,143,000 0.500 of 1% of average daily $ 497,000
net assets
Kemper Small Cap Growth 12/31/97 $137,415,000 0.650 of 1% of average daily $ 633,000
Portfolio net assets
Kemper Small Cap Value 12/31/97 $ 76,108,000 0.750 of 1% of average daily $ 307,000
Portfolio net assets
Kemper Total Return Portfolio 12/31/97 $786,996,000 0.550 of 1% of average daily $4,072,000
net assets
Kemper Value+Growth Portfolio 12/31/97 $ 69,094,000 0.750 of 1% of average daily $ 257,000
net assets
Kemper-Dreman Financial N/A(+) N/A(+) 0.75 of 1% of the first $250 N/A(+)
Services Portfolio million of average daily net
assets; 0.72 of 1% of the
next $750 million; 0.70 of 1%
of the next $1.5 billion;
0.68 of 1% of the next $2.5
billion; 0.65 of 1% of the
next $2.5 billion; 0.64 of 1%
of the next $2.5 billion;
0.63 of 1% of the next $2.5
billion and 0.62 of 1%
thereafter
</TABLE>
<PAGE> 121
<TABLE>
<CAPTION>
AGGREGATE
MANAGEMENT
FUND FISCAL YEAR NET ASSETS MANAGEMENT FEE RATE+ FEE PAID++
---- ----------- ---------- -------------------- ----------
<S> <C> <C> <C> <C>
Kemper-Dreman High Return N/A(+) N/A(+) 0.75 of 1% of the first $250 N/A(+)
Equity Portfolio million of average daily net
assets; 0.72 of 1% of the
next $750 million; 0.70 of 1%
of the next $1.5 billion;
0.68 of 1% of the next $2.5
billion; 0.65 of 1% of the
next $2.5 billion; 0.64 of 1%
of the next $2.5 billion;
0.63 of 1% of the next $2.5
billion and 0.62 of 1%
thereafter
</TABLE>
- ------------------------------
+The management fee rates shown are for each Fund's most recently completed
fiscal year, unless otherwise noted.
++Aggregate management fees disclosed in this table may include fees paid to
successors and affiliates of Scudder Kemper Investments, Inc.
@ Kemper Blue Chip Portfolio and Kemper Global Income Portfolio commenced
operations on May 1, 1997.
+Fee information is not available for Kemper-Dreman High Return Equity
Portfolio, Kemper-Dreman Financial Services Portfolio, Kemper Global Blue
Chip Portfolio and Kemper International Growth and Income Portfolio, each of
which did not commence operations until May 1, 1998.
2
<PAGE> 122
APPENDIX 5
DATES RELATING TO
INVESTMENT MANAGEMENT AGREEMENTS
<TABLE>
<CAPTION>
TERMINATION
FORMER DATE
INVESTMENT NEW (UNLESS
DATE OF MANAGEMENT INVESTMENT CONTINUED)
FORMER AGREEMENT MANAGEMENT FOR NEW
COMMENCEMENT INVESTMENT LAST AGREEMENT INVESTMENT
OF MANAGEMENT APPROVED BY LAST APPROVED MANAGEMENT
FUND OPERATIONS AGREEMENT SHAREHOLDERS BY TRUSTEES AGREEMENT
---- ------------ ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Kemper Blue Chip 5/1/97 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper Contrarian 5/1/96 12/31/97 12/3/97 9/22/98 9/30/99
Value Portfolio*
Kemper Global Blue 5/5/98 5/1/98 4/30/98@ 9/22/98 9/30/99
Chip Portfolio
Kemper Global Income 5/1/97 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper Government 9/3/87 12/31/97 12/3/97 9/22/98 9/30/99
Securities
Portfolio
Kemper Growth 9/3/87 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper High Yield 9/3/87 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper Horizon 10+ 5/1/96 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper Horizon 20+ 5/1/96 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper Horizon 5 5/1/96 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper International 5/5/98 5/1/98 4/30/98@ 9/22/98 9/30/99
Growth and Income
Portfolio
Kemper International 1/6/92 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper Investment 5/1/96 12/31/97 12/3/97 9/22/98 9/30/99
Grade Bond
Portfolio
Kemper Money Market 9/3/87 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper Small Cap 5/1/94 12/31/97 12/3/97 9/22/98 9/30/99
Growth Portfolio
Kemper Small Cap 5/1/96 12/31/97 12/3/97 9/22/98 9/30/99
Value Portfolio
Kemper Total Return 9/3/87 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
Kemper Value+Growth 5/1/96 12/31/97 12/3/97 9/22/98 9/30/99
Portfolio
</TABLE>
<PAGE> 123
<TABLE>
<CAPTION>
TERMINATION
FORMER DATE
INVESTMENT NEW (UNLESS
DATE OF MANAGEMENT INVESTMENT CONTINUED)
FORMER AGREEMENT MANAGEMENT FOR NEW
COMMENCEMENT INVESTMENT LAST AGREEMENT INVESTMENT
OF MANAGEMENT APPROVED BY LAST APPROVED MANAGEMENT
FUND OPERATIONS AGREEMENT SHAREHOLDERS BY TRUSTEES AGREEMENT
---- ------------ ---------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Kemper-Dreman 5/4/98 5/1/98 4/30/98@ 9/22/98 9/30/99
Financial Services
Portfolio
Kemper-Dreman High 5/1/98 5/1/98 4/30/98@ 9/22/98 9/30/99
Return Equity
Portfolio
</TABLE>
- ---------------
@ Approval by the sole shareholder of the Fund prior to the Fund's commencement
of operations.
* Formerly Kemper Value Portfolio.
2
<PAGE> 124
APPENDIX 6
TRUSTEES AND OFFICERS ASSOCIATED
WITH SCUDDER KEMPER
<TABLE>
<CAPTION>
NAME POSITION WITH TRUST ASSOCIATION WITH SCUDDER KEMPER
---- ----------------------- ---------------------------------------
<S> <C> <C>
Daniel Pierce Trustee and Chairman of Managing Director
the Board
Edmond D. Villani Trustee Chief Executive Officer and Managing
Director
Mark S. Casady President Managing Director
David H. Burshtan Vice President Senior Vice President
Robert S. Cessine Vice President Managing Director
Tracy McCormick Chester Vice President Managing Director
Philip J. Collora Vice President and Senior Vice President
Secretary
Diego Espinosa Vice President Senior Vice President
Thomas H. Forester Vice President Vice President
Philip S. Fortuna Vice President Managing Director
Frederick L. Gaskin Vice President Vice President
Gary A. Langbaum Vice President Managing Director
Maureen P. Lentz Vice President Senior Vice President
Thomas W. Littauer Vice President Managing Director
Ann M. McCreary Vice President Managing Director
Michael A. McNamara Vice President Managing Director
Robert C. Peck Jr. Vice President Managing Director
Kathryn L. Quirk Vice President Managing Director
Frank J. Rachwalski, Jr. Vice President Managing Director
Sheridan P. Reilly Vice President Senior Vice President
Harry E. Resis, Jr. Vice President Managing Director
Steven H. Reynolds Vice President Managing Director
Thomas F. Sassi Vice President Managing Director
Kurt R. Stalzer Vice President Managing Director
Steven T. Stokes Vice President Vice President
Richard L. Vandenberg Vice President Managing Director
Linda J. Wondrack Vice President Senior Vice President
John R. Hebble Treasurer Senior Vice President
Brenda Lyons Assistant Treasurer Senior Vice President
Maureen E. Kane Assistant Secretary Vice President
Caroline Pearson Assistant Secretary Senior Vice President
Elizabeth C. Werth Assistant Secretary Vice President
</TABLE>
<PAGE> 125
(THIS PAGE INTENTIONALLY LEFT BLANK)
<PAGE> 126
Thank you
Thank you
for mailing your proxy card promptly!
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We appreciate your
continuing support and
look forward to serving
your future investment needs.
<PAGE> 127
INVESTORS FUND SERIES
- --------------------------------------------------------------------------------
KEMPER PORTFOLIOS
c Kemper Money Market Portfolio
c Kemper Total Return Portfolio
c Kemper High Yield Portfolio
c Kemper Growth Portfolio
c Kemper Government Securities Portfolio
c Kemper International Portfolio
c Kemper Small Cap Growth Portfolio
c Kemper Investment Grade Bond Portfolio
c Kemper Contrarian Value Portfolio
c Kemper Small Cap Value Portfolio
c Kemper Value+Growth Portfolio
c Kemper Horizon 20+ Portfolio
c Kemper Horizon 10+ Portfolio
c Kemper Horizon 5 Portfolio
c Kemper Blue Chip Portfolio
c Kemper Global Income Portfolio
c Kemper-Dreman Financial Services Portfolio
c Kemper-Dreman High Return Equity Portfolio
c Kemper International Growth and Income Portfolio
c Kemper Global Blue Chip Portfolio
Investor
(LOGO)Printed on recycled paper.
<PAGE> 128
[KEMPER LOGO] PLEASE VOTE PROMPTLY!
Your vote is needed! Please vote on the reverse side of this form and sign in
the space provided below. Return your completed proxy in the enclosed envelope
today.
You may receive additional proxies for your other accounts. These are not
duplicates; you should sign and return each proxy card in order for your votes
to be counted. Please return them as soon as possible to help save the cost of
additional mailings.
Please fold and detach card at perforation before mailing.
[FUND NAME PRINTS HERE]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
SPECIAL MEETING OF SHAREHOLDERS -- DECEMBER 16, 1998
The undersigned hereby appoints Bruce H. Goldfarb, Kathryn L. Quirk, Thomas
F. McDonough and Daniel Pierce and each of them, the proxies of the undersigned,
with the power of substitution to each of them, to vote all shares of the Fund
which the undersigned is entitled to vote at the Special Meeting of Shareholders
of the Fund to be held at the offices of Scudder Kemper Investments, Inc., Two
International Place, Boston, Massachusetts 02110, on Thursday, December 16, 1998
at 11:00 a.m., Eastern time, and at any adjournments thereof.
Dated _______ , 1998
Please sign exactly as your name or
names appear. When signing as
attorney, executor, administrator,
trustee or guardian, please give
your full title as such.
-----------------------------------
PLEASE INDICATE YOUR VOTING INSTRUCTIONS ON THE CARD BELOW. SIGN, DATE AND
RETURN IT IN THE ENVELOPE PROVIDED. TO SAVE THE COST OF ADDITIONAL
SOLICITATIONS, PLEASE MAIL YOUR CARD PROMPTLY.
Please fold and detach card at perforation before mailing.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES PROVIDED, THE UNDERSIGNED'S VOTE
WILL BE CAST FOR EACH NUMBERED ITEM LISTED BELOW.
The Board members of your Fund, including those who are not affiliated with
the Fund or Scudder Kemper Investments, Inc. or Zurich Insurance Company,
recommend that you vote FOR each item.
1. To approve the new Investment Management Agreement
between the Fund and Scudder Kemper Investments, Inc.;
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. (For Shareholders of KGIP, KIP, KDFSP and KDHRP only)
To approve a new Sub-Advisory Agreement for the Fund with
either Scudder Investment (U.K.) Limited or Dreman Value
Management, L.L.C. as applicable; [ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To modify or eliminate certain policies and to eliminate the
shareholder approval requirement as to certain other matters.
[ ]
FOR
ALL
APPLICABLE
PROPOSALS EXCEPT
AS NOTED BELOW
[ ] AGAINST ALL [ ] ABSTAIN ALL
<TABLE>
<S> <C> <C>
3.0 Investment objectives 3.10 Margin purchases and short 3.17 Investment in issuers with
3.1 Investment Policies sales short histories
3.2 Diversification 3.11 Purchase of securities of 3.18 Investment in other
3.3 Borrowing related issuers investment companies
3.4 Senior securities 3.12 Pledging of assets 3.19 Investment other than in
3.5 Concentration 3.13 Purchases of voting accordance with objectives and
3.6 Underwriting of securities policies
securities 3.14 Purchases of options
3.7 Investment in real 3.15 Restricted and illiquid
estate securities
3.8 Purchase of commodities 3.16 Investment in mineral
3.9 Lending exploration
</TABLE>
TO VOTE AGAINST A PARTICULAR PROPOSED CHANGE APPLICABLE TO YOUR FUND, WRITE THE
PROPOSAL NUMBER ON THE LINE BELOW.
- --------------------------------------------------------------------------------
The proxies are authorized to vote in their discretion on any other business
which may properly come before the meeting and any adjournments thereof.
