<PAGE> 1
As filed with the Securities and Exchange Commission on January 22, 1996.
1933 ACT REGISTRATION NO. 33-12938
1940 ACT REGISTRATION NO. 811-5076
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM N-1A
<TABLE>
<S> <C>
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 9 /X/
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 10 /X/
</TABLE>
(Check appropriate box or boxes)
------------------
TAX-EXEMPT CALIFORNIA
MONEY MARKET FUND
(Exact name of Registrant as Specified in Charter)
<TABLE>
<CAPTION>
120 South LaSalle Street, Chicago, Illinois 60603
<S> <C>
(Address of Principal Executive Office) (Zip Code)
</TABLE>
Registrant's Telephone Number, including Area Code: (312) 781-1121
<TABLE>
<S> <C>
Philip J. Collora, Vice President and Secretary With a copy to:
Tax-Exempt California Money Market Fund Charles F. Custer
120 South LaSalle Street Vedder, Price, Kaufman & Kammholz
Chicago, Illinois 60603 222 N. LaSalle Street
(Name and Address of Agent for Service) Chicago, Illinois 60601
</TABLE>
Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Rule 24f-2 Notice for Registrant's fiscal year ended September 30,
1995 was filed on or about November 22, 1995.
It is proposed that this filing will become effective (check appropriate
box)
/ / immediately upon filing pursuant to paragraph (b)
/X/ on February 1, 1996 pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART A
OF FORM N-1A AND PROSPECTUS
<TABLE>
<CAPTION>
ITEM NUMBER
OF FORM N-1A LOCATION IN PROSPECTUS
------------ ----------------------
<S> <C> <C>
1. Cover Page.............................. Cover Page
2. Synopsis................................ Summary; Summary of Expenses
3. Condensed Financial Information......... Financial Highlights; Performance
4. General Description of Registrant....... Capital Structure; Investment Objective,
Policies and Risk Factors
5. Management of the Fund.................. Investment Manager and Services
5A. Management's Discussion of Fund
Performance............................. Inapplicable
6. Capital Stock and Other Securities...... Investment Objective, Policies and Risk
Factors; Dividends and Taxes; Purchase of
Shares; Capital Structure
7. Purchase of Securities Being Offered.... Purchase of Shares; Investment Manager and
Services; Net Asset Value; Special Features
8. Redemption or Repurchase................ Redemption of Shares
9. Pending Legal Proceedings............... Inapplicable
</TABLE>
<PAGE> 3
TAX-EXEMPT CALIFORNIA MONEY MARKET
FUND
120 South LaSalle Street
Chicago, Illinois 60603
1-800-231-8568
TABLE OF CONTENTS
- --------------------------------------
<TABLE>
<S> <C>
Summary 1
- ------------------------------------------------
Summary of Expenses 2
- ------------------------------------------------
Financial Highlights 2
- ------------------------------------------------
Investment Objective, Policies and Risk
Factors 3
- ------------------------------------------------
Municipal Securities and
Investment Techniques 4
- ------------------------------------------------
Net Asset Value 6
- ------------------------------------------------
Purchase of Shares 7
- ------------------------------------------------
Redemption of Shares 8
- ------------------------------------------------
Dividends and Taxes 10
- ------------------------------------------------
Investment Manager and Services 11
- ------------------------------------------------
Special Features 13
- ------------------------------------------------
Performance 13
- ------------------------------------------------
Capital Structure 14
- ------------------------------------------------
</TABLE>
This prospectus contains information
about the Fund that a prospective
investor should know before investing
and should be retained for future
reference. A Statement of Additional
Information dated February 1, 1996,
has been filed with the Securities and
Exchange Commission and is
incorporated herein by reference. It
is available upon request without
charge from the Fund at the address or
telephone number on this cover or the
firm from which this prospectus was
received.
THESE SECURITIES HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
A CASH MANAGEMENT
SERVICE PROVIDED THROUGH
TAX-EXEMPT
CALIFORNIA
MONEY MARKET
FUND
PROSPECTUS February 1, 1996
TAX-EXEMPT CALIFORNIA MONEY MARKET
FUND
120 South LaSalle Street, Chicago,
Illinois 60603 1-800-231-8568. The
objective of the Fund is maximum
current income that is exempt from
federal and State of California income
taxes to the extent consistent with
stability of capital. The Fund pursues
its objective primarily through a
professionally managed, diversified
portfolio of short-term high quality
California Municipal Securities. The
Fund currently is available for sale
only in California.
AN INVESTMENT IN THE FUND IS NEITHER
INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND
IS NOT A DEPOSIT OR OBLIGATION OF, OR
GUARANTEED OR ENDORSED, BY ANY BANK.
THERE CAN BE NO ASSURANCE THAT THE
FUND WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE> 4
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603, TELEPHONE 1-800-231-8568
SUMMARY
INVESTMENT OBJECTIVES. Tax-Exempt California Money Market Fund (the "Fund") is
an open-end, diversified management investment company. The Fund invests in a
portfolio of short-term high quality municipal obligations issued by or on
behalf of the State of California, its political subdivisions, authorities and
corporations, and territories and possessions of the United States and their
political subdivisions, agencies and instrumentalities the interest from which
is, in the opinion of bond counsel to the issuer, exempt from federal and State
of California income taxes. The Fund seeks maximum current income that is exempt
from federal and State of California income taxes to the extent consistent with
stability of capital. The Fund seeks to maintain a net asset value of $1.00 per
share. There is no assurance that the objective of the Fund will be achieved or
that the Fund will be able to maintain a net asset value of $1.00 per share. See
"Investment Objectives, Policies and Risk Factors."
INVESTMENT MANAGER AND SERVICES. Kemper Financial Services, Inc. ("KFS") is the
investment manager for the Fund and provides the Fund with continuous
professional investment supervision. KFS is paid an annual investment management
fee, payable monthly, on a graduated basis of .22 of 1% of the first $500
million of average daily net assets, .20 of 1% of the next $500 million, .175 of
1% of the next $1 billion, .16 of 1% of the next $1 billion and .15 of 1% of
average daily net assets over $3 billion. Kemper Distributors, Inc. ("KDI"), an
affiliate of KFS, is the primary administrator, distributor and principal
underwriter of the Fund and, as such, provides information and services for
existing and potential shareholders and acts as agent of the Fund in the sale of
its shares. KDI receives a distribution services fee, payable monthly, at an
annual rate of .33 of 1% of average daily net assets of the Fund. As
distributor, KDI normally pays financial services firms that provide cash
management and other services for their customers at an annual rate ranging from
.15 of 1% to .33 of 1% of average daily net assets of those accounts that they
maintain and service. See "Investment Manager and Services."
PURCHASES AND REDEMPTIONS. Shares of the Fund are available at net asset value
through selected financial services firms. The minimum initial investment is
$1,000 and the minimum subsequent investment is $100. See "Purchase of Shares."
Shares may be redeemed at the net asset value next determined after receipt by
the Fund's Shareholder Service Agent of a request to redeem in proper form.
Shares may be redeemed by written request or by using one of the Fund's
expedited redemption procedures. See "Redemption of Shares."
DIVIDENDS. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested in additional shares, unless the shareholder makes a
different election. See "Dividends and Taxes."
GENERAL INFORMATION AND CAPITAL. The Fund is organized as a business trust under
the laws of Massachusetts and may issue an unlimited number of shares of
beneficial interest. Shares are fully paid and nonassessable when issued, are
transferable without restriction and have no preemptive or conversion rights.
The Fund is not required to hold annual shareholder meetings; but will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. See "Capital Structure."
1
<PAGE> 5
SUMMARY OF EXPENSES
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES........................................................ None
ANNUAL FUND OPERATING EXPENSES (as a percentage of average net assets)
Management Fees......................................................................... .22%
12b-1 Fees.............................................................................. .33%
Other Expenses.......................................................................... .20%
-----
Total Operating Expenses................................................................ .75%
=====
</TABLE>
EXAMPLE
<TABLE>
<CAPTION>
1 3 5 10
YEAR YEARS YEARS YEARS
--- ---- ---- ----
<S> <C> <C> <C> <C>
You would pay the following expenses
on a $1,000 investment, assuming
(1) 5% annual return and
(2) redemption at the end of each time period: $ 8 $ 24 $ 42 $ 93
</TABLE>
The purpose of the preceding table is to assist investors in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. Investment dealers and other firms may independently charge
shareholders additional fees. As a result of the accrual of 12b-1 fees,
long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted by the National Association of Securities
Dealers. The Example assumes a 5% annual rate of return pursuant to requirements
of the Securities and Exchange Commission. This hypothetical rate of return is
not intended to be representative of past or future performance of the Fund. THE
EXAMPLE SHOULD NOT BE CONSIDERED TO BE A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
The table below shows financial information for the Fund expressed in terms of
one share outstanding throughout the period. The information in the table is
covered by the report of the Fund's independent auditors. The report is
contained in the Fund's Registration Statement and is available from the
Fund.The financial statements contained in the Fund's 1995 Annual Report to
Shareholders are incorporated herein by reference and may be obtained by writing
or calling the Fund.
<TABLE>
<CAPTION>
JUNE 2,
1987 TO
YEAR ENDED SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
------------------- ----------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-----------------------------------------------------------------------------------------
Net investment income and dividends
declared .03 .02 .02 .02 .04 .05 .05 .04 .01
-----------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
-----------------------------------------------------------------------------------------
TOTAL RETURN (%): 3.23 1.97 1.88 2.64 4.02 5.16 5.69 4.58 1.25
-----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .75 .71 .69 .69 .66 .64 .66 .67 .58
-----------------------------------------------------------------------------------------
Net investment income 3.16 1.94 1.87 2.62 3.99 5.03 5.54 4.48 3.82
-----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of period
(in thousands) $105,292 101,148 122,560 128,822 150,522 224,854 236,506 128,958 46,347
-----------------------------------------------------------------------------------------
</TABLE>
Ratios have been determined on an annualized basis. Total return is not
annualized.
2
<PAGE> 6
INVESTMENT OBJECTIVE, POLICIES AND RISK FACTORS
The investment objective of the Fund is maximum current income that is exempt
from federal and State of California income taxes to the extent consistent with
stability of capital. The Fund pursues its objective primarily through a
professionally managed, diversified portfolio of short-term high quality
municipal obligations, the income from which is exempt from federal and State of
California income taxes. The Fund is a money market mutual fund that has been
designed to provide investors with professional management of short-term
investment dollars. The Fund pools individual and institutional investors' money
which it uses to buy tax-exempt money market instruments. Because the Fund
combines its shareholders' money, it can buy and sell large blocks of
securities, which reduces transaction costs and maximizes yields. The Fund is
managed by investment professionals who analyze market trends to take advantage
of changing conditions. Its investments are subject to price fluctuations
resulting from rising or declining interest rates and are subject to the ability
of the issuers of such investments to make payment at maturity. Because of their
short maturities, liquidity and high quality, money market instruments, such as
those in which the Fund invests, are generally considered to be among the safest
available. There can be no assurance that the Fund will achieve its objective or
that it will maintain a net asset value of $1.00 per share.
Under normal market conditions, the Fund attempts to invest 100%, and will
invest at least 80%, of its total assets in tax-exempt debt obligations issued
by or on behalf of the State of California and other states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities ("Municipal Securities")
and will invest at least 65% of its total assets in tax-exempt obligations of
the State of California and its political subdivisions ("California Municipal
Securities"). In compliance with the position of the staff of the Securities and
Exchange Commission, the Fund does not consider "private activity" bonds as
described in "Dividends and Taxes" as Municipal Securities for purposes of the
80% limitation. This is a fundamental policy so long as the staff maintains its
position, after which it would become non-fundamental. Dividends to the extent
of interest income received on California Municipal Securities will be exempt
from both federal and State of California income tax provided at least 50% of
the Fund's total assets are invested in California Municipal Securities. Such
dividend income may be subject to local taxes. See "Dividends and Taxes." The
Fund's assets will consist of Municipal Securities, temporary investments, as
described below, and cash.
The Fund will invest only in Municipal Securities that at the time of purchase:
(a) are rated within the two highest ratings of municipal securities (Aaa or Aa)
assigned by Moody's Investors Service, Inc. ("Moody's") or (AAA or AA) assigned
by Standard & Poor's Corporation ("S&P"); (b) are guaranteed or insured by the
U.S. Government as to the payment of principal and interest; (c) are fully
collateralized by an escrow of U.S. Government securities; (d) have at the time
of purchase Moody's short-term municipal securities rating of MIG-2 or higher or
a municipal commercial paper rating of P-2 or higher, or S&P's municipal
commercial paper rating of A-2 or higher; (e) are unrated, if longer term
municipal securities of that issuer are rated within the two highest rating
categories by Moody's or S&P; or (f) are determined by the investment manager to
be at least equal in quality to one or more of the above ratings. In addition,
the Fund limits its investment to securities that meet the quality requirements
of Rule 2a-7 under the Investment Company Act of 1940 ("1940 Act"). See "Net
Asset Value."
The investment objective of the Fund and the investment policies set forth in
the three preceding paragraphs are fundamental and may not be changed without
the affirmative vote of a majority of the outstanding shares of the Fund, as
defined below.
From time to time, as a defensive measure or when acceptable short-term
Municipal Securities are not available, the Fund may invest in taxable
"temporary investments" that include: obligations of the U.S. Government, its
agencies or instrumentalities; debt securities rated within the two highest
grades by Moody's or S&P; commercial paper rated in the two highest grades by
either of such rating services; certificates of deposit of domestic banks with
assets of $1 billion or more; and any of the foregoing temporary investments
subject to repurchase agreements. Under a repurchase agreement the Fund acquires
ownership of a security from a broker-dealer or bank that agrees to repurchase
the security at a mutually agreed upon time and price (which price is higher
than the purchase price),
3
<PAGE> 7
thereby determining the yield during the Fund's holding period. Repurchase
agreements with broker-dealer firms will be limited to obligations of the U.S.
Government, its agencies or instrumentalities. Maturity of the securities
subject to repurchase may exceed one year. Interest income from temporary
investments is taxable to shareholders as ordinary income. Although the Fund is
permitted to invest in taxable securities, it is the Fund's primary intention to
generate income dividends that are not subject to federal or State of California
income taxes. See "Dividends and Taxes." For a description of the ratings, see
"Appendix--Ratings of Investments" in the Statement of Additional Information.
The Fund may also engage in "reverse repurchase agreements," that are repurchase
agreements in which the Fund, as the seller of securities, agrees to repurchase
them at an agreed upon time and price. Reverse repurchase agreements will only
be used by the Fund to raise cash on a temporary basis to meet redemptions when
it would like to retain the Municipal Securities in its portfolio and it expects
to be able to repurchase them in a short time with funds from maturing
investments and from net sales of Fund shares. Use of reverse repurchase
agreements, because of the lower transaction costs involved, is often preferable
to a regular sale and later repurchase of the securities.
The Fund may borrow money, including through reverse repurchase agreements, for
temporary purposes, but not for the purpose of purchase of investments, in an
amount up to one-third of the value of the Fund's total assets and may pledge up
to 10% of the Fund's net assets to secure borrowings. The Fund will not purchase
illiquid securities, including repurchase agreements maturing in more than seven
days, if, as a result thereof, more than 10% of the Fund's total assets valued
at the time of the transaction would be invested in such securities. Up to 25%
of the total assets of the Fund may be invested at any time in debt obligations
of a single issuer or of issuers in a single industry, although the Fund may
invest without limitation in Municipal Securities the income on which may be
derived from projects of a single type.
The Fund has adopted certain investment restrictions that are presented in the
Statement of Additional Information and that, together with the investment
objective and fundamental policies of the Fund, cannot be changed without
approval by holders of a majority of its outstanding voting shares. As defined
in the 1940 Act, this means the lesser of the vote of (a) 67% of the shares of
the Fund present at a meeting where more than 50% of the outstanding shares are
present in person or by proxy; or (b) more than 50% of the outstanding shares of
the Fund.
MUNICIPAL SECURITIES AND INVESTMENT TECHNIQUES
The two principal classifications of Municipal Securities consist of "general
obligation" and "revenue" issues. General obligation bonds are secured by the
issuer's pledge of its full faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source such as the
user of the facility being financed. Industrial development bonds held by the
Fund are in most cases revenue bonds and are not payable from the unrestricted
revenues of the issuer. Among other types of instruments, the Fund may purchase
tax-exempt commercial paper, warrants and short-term municipal notes such as tax
anticipation notes, bond anticipation notes, revenue anticipation notes,
construction loan notes and other forms of short-term loans. Such notes are
issued with a short-term maturity in anticipation of the receipt of tax
payments, the proceeds of bond placements or other revenues. A more detailed
discussion of Municipal Securities and the Moody's and S&P ratings outlined
above under "Investment Objective, Policies and Risk Factors" is contained in
the Statement of Additional Information.
The Fund may purchase securities which provide for the right to resell them to
an issuer, bank or dealer at an agreed upon price or yield within a specified
period prior to the maturity date of such securities. Such a right to resell is
referred to as a "Standby Commitment." Securities may cost more with Standby
Commitments than without them. Standby Commitments will be entered into solely
to facilitate portfolio liquidity. A Standby Commitment may be exercised before
the maturity date of the related Municipal Security if the Fund's investment
manager revises its evaluation of the creditworthiness of the underlying
security or of the entity issuing the Standby Commitment. The
4
<PAGE> 8
Fund's policy is to enter into Standby Commitments only with issuers, banks or
dealers which are determined by the Fund's investment manager to present minimal
credit risks. If an issuer, bank or dealer should default on its obligation to
repurchase an underlying security, the Fund might be unable to recover all or a
portion of any loss sustained from having to sell the security elsewhere. For
purposes of valuing the Fund's securities at amortized cost, the maturity of
Municipal Securities will not be considered shortened by any Standby Commitment
to which such security is subject.
The Fund may invest in certain Municipal Securities having rates of interest
that are adjusted periodically or that "float" continuously according to
formulae intended to minimize fluctuations in values of the instruments
("Variable Rate Notes"). The interest rate on Variable Rate Notes ordinarily is
determined by reference to or is a percentage of a bank's prime rate, the 90 day
U.S. Treasury bill rate, the rate of return on commercial paper or bank
certificates of deposit, or some similar objective standard. Generally, the
changes in the interest rate on Variable Rate Notes reduce the fluctuation in
the market value of such notes. Accordingly, as interest rates decrease or
increase, the potential for capital appreciation or capital depreciation is less
than for fixed rate obligations. Variable Rate Loan Participations are similar
to Variable Rate Notes except they are made available through a commercial bank
which arranges the tax-exempt loan. Variable Rate Notes and Variable Rate Loan
Participations typically are bought and sold among institutional investors. The
Fund currently intends to invest a substantial portion of its assets in Variable
Rate Notes and Variable Rate Loan Participations. Variable Rate Demand Notes
have a demand feature which entitles the purchaser to resell the securities at
par value. The rate of return on Variable Rate Demand Notes also varies
according to some objective standard, such as an index of short-term tax-exempt
rates. Variable rate instruments with a demand feature enable the Fund to
purchase instruments with a stated maturity in excess of one year. The Fund
determines the maturity of variable rate instruments in accordance with
Securities and Exchange Commission rules that allow the Fund to consider certain
of such instruments as having maturities shorter than the maturity date on the
face of the instrument.
The Fund may purchase high quality Certificates of Participation in trusts that
hold Municipal Securities. A Certificate of Participation gives the Fund an
undivided interest in the Municipal Security in the proportion that the Fund's
interest bears to the total principal amount of the Municipal Security. These
Certificates of Participation may be variable rate or fixed rate with remaining
maturities of one year or less. A Certificate of Participation may be backed by
an irrevocable letter of credit or guarantee of a financial institution that
satisfies rating agencies as to the credit quality of the Municipal Security
supporting the payment of principal and interest on the Certificate of
Participation. Payments of principal and interest would be dependent upon the
underlying Municipal Security and may be guaranteed under a letter of credit to
the extent of such credit. The quality rating by a rating service of an issue of
Certificates of Participation is based primarily upon the rating of the
Municipal Security held by the trust and the credit rating of the issuer of any
letter of credit and of any other guarantor providing credit support to the
issue. The Fund's investment manager considers these factors as well as others,
such as any quality ratings issued by the rating services identified above, in
reviewing the credit risk presented by a Certificate of Participation and in
determining whether the Certificate of Participation is appropriate for
investment by the Fund. The Fund's investment manager anticipates that, for most
publicly offered Certificates of Participation, there will be a liquid secondary
market or there may be demand features enabling the Fund to readily sell its
Certificates of Participation prior to maturity to the issuer or a third party.
As to those instruments with demand features, the Fund intends to exercise its
right to demand payment from the issuer of the demand feature only upon a
default under the terms of the Municipal Security, as needed to provide
liquidity to meet redemptions, or to maintain a high quality investment
portfolio.
The Fund may purchase and sell Municipal Securities on a when-issued or delayed
delivery basis. A when-issued or delayed delivery transaction arises when
securities are bought or sold for future payment and delivery to secure what is
considered to be an advantageous price and yield to the Fund at the time it
enters into the transaction. In determining the maturity of portfolio securities
purchased on a when-issued or delayed delivery basis, the Fund will consider
them purchased on the date when it commits itself to the purchase.
5
<PAGE> 9
A security purchased on a when-issued basis, like all securities held in the
Fund's portfolio, is subject to changes in market value based upon changes in
the level of interest rates and investors' perceptions of the creditworthiness
of the issuer. Generally such securities will appreciate in value when interest
rates decline and depreciate in value when interest rates rise. Therefore if, in
order to achieve higher interest income, the Fund remains substantially fully
invested at the same time that it has purchased securities on a when-issued
basis, there will be a greater possibility that the net asset value of the
Fund's shares will vary from $1.00 per share, since the value of a when-issued
security is subject to market fluctuation and no interest accrues to the
purchaser prior to settlement of the transaction. See "Net Asset Value."
The Fund will only make commitments to purchase Municipal Securities on a
when-issued or delayed delivery basis with the intention of actually acquiring
the securities, but the Fund reserves the right to sell these securities before
the settlement date if deemed advisable. The sale of securities may result in
the realization of gains that are not exempt from federal or State of California
income tax.
Yields on Municipal Securities are dependent on a variety of factors, including
the general conditions of the money market and the municipal bond market, and
the size, maturity and rating of the particular offering. The ratings of Moody's
and S&P represent their opinions as to the quality of the Municipal Securities
which they undertake to rate. It should be emphasized, however, that ratings are
general and are not absolute standards of quality. Consequently, Municipal
Securities with the same maturity, coupon and rating may have different yields.
Investors should be aware that certain California constitutional amendments,
legislative measures, executive orders, civil actions and voter initiatives, as
well as the general financial condition of the State, could result in certain
adverse consequences for owners of California Municipal Securities. For
instance, amendments in recent years to the California Constitution and statutes
that limit the taxing and spending authority of California governmental entities
may impair the ability of the issuers of some California Municipal Securities to
maintain debt service on their obligations. Other measures affecting the taxing
or spending authority of California or its political subdivisions may be
approved or enacted in the future. Some of the significant financial
considerations relating to the Fund's investments in California Municipal
Securities are summarized in the Statement of Additional Information.
In seeking to achieve its investment objective, the Fund may invest all or any
part of its assets in Municipal Securities that are industrial development
bonds. Moreover, although the Fund does not currently intend to do so on a
regular basis, it may invest more than 25% of its assets in Municipal Securities
which are repayable out of revenue streams generated from economically related
projects or facilities, if such investment is deemed necessary or appropriate by
the Fund's investment adviser. To the extent that the Fund's assets are
concentrated in Municipal Securities payable from revenues on economically
related projects and facilities, the Fund will be subject to the peculiar risks
presented by such projects to a greater extent than it would be if the Fund's
assets were not so concentrated.
NET ASSET VALUE
Fund shares are sold at their net asset value next determined after an order and
payment are received in the form described under "Purchase of Shares." The net
asset value of a Fund share is calculated by dividing the total assets of the
Fund less its liabilities by the total number of shares outstanding. The net
asset value per share of the Fund is determined on each day the New York Stock
Exchange is open for trading, at 11:00 a.m. and 3:00 p.m. Chicago time, and on
each other day on which there is a sufficient degree of trading in the Fund's
investments that its net asset value might be affected, except that the net
asset value will not be computed on a day on which no orders to purchase shares
were received and no shares were tendered for redemption. The Fund seeks to
maintain a net asset value of $1.00 per share.
The Fund values its portfolio instruments at amortized cost in accordance with
Rule 2a-7 under the 1940 Act, which means that they are valued at their
acquisition cost, as adjusted for amortization of premium or accretion of
discount, rather than at current market value. Calculations are made to compare
the value of the Fund's
6
<PAGE> 10
investments, valued at amortized cost, with market-based values. Market-based
valuations are obtained by using actual quotations provided by market makers,
estimates of market value, or values obtained from yield data relating to
classes of money market instruments published by reputable sources at the mean
between the bid and asked prices for the instruments. If a deviation of 1/2 of
1% or more were to occur between the net asset value per share calculated by
reference to market-based values and the Fund's $1.00 per share net asset value,
or if there were any other deviation that the Board of Trustees of the Fund
believed would result in a material dilution to shareholders or purchasers, the
Board of Trustees would promptly consider what action, if any, should be
initiated. In order to value its investments at amortized cost, the Fund
purchases only securities with a maturity of 397 days or less and maintains a
dollar-weighted average portfolio maturity of 90 days or less. In addition, the
Fund limits its portfolio investments to securities that meet the quality
requirements of Rule 2a-7. Under these requirements, the Fund may only purchase
U.S. Dollar denominated instruments that are determined to present minimal
credit risks and that are at the time of acquisition "Eligible Securities" as
defined in Rule 2a-7.
PURCHASE OF SHARES
Fund shares are sold at their net asset value with no sales charge through
selected financial services firms, such as broker-dealers and banks ("firms").
The minimum initial investment is $1,000 and the minimum subsequent investment
is $100. Under an automatic investment plan, the minimum initial and subsequent
investment is $50. These minimum amounts may be changed at any time in
management's discretion. Firms offering Fund shares may set higher minimums for
accounts they service and may change such minimums at their discretion.
The Fund seeks to be as fully invested as possible at all times in order to
achieve maximum income. Since the Fund will be investing in instruments that
normally require immediate payment in Federal Funds (monies credited to a bank's
account with its regional Federal Reserve Bank), the Fund has adopted procedures
for the convenience of its shareholders and to ensure that it receives
investable funds. Orders for the purchase of shares received by wire transfer in
the form of Federal Funds will be effected at the next determined net asset
value. Shares purchased by wire will receive that day's dividend if effected at
or prior to the 11:00 a.m. Chicago time net asset value determination, otherwise
such shares will receive the dividend for the next business day. Orders for
purchase accompanied by a check or other negotiable bank draft drawn on a
domestic bank will be accepted and effected as of 3:00 p.m. Chicago time on the
next business day following receipt and such shares will receive the dividend
for the business day following the day the purchase is effected. If an order is
accompanied by a check drawn on a foreign bank, funds must normally be collected
on such check before shares will be purchased. See "Purchase and Redemption of
Shares" in the Statement of Additional Information.
If payment is wired in Federal Funds, the payment should be directed to State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110,
the sub-custodian for the Fund. If payment is to be wired, call the firm from
which you received this prospectus for proper instructions.
CLIENTS OF FIRMS. Firms provide varying arrangements for their clients with
respect to the purchase and redemption of Fund shares and the confirmation
thereof. Such firms are responsible for the prompt transmission of purchase and
redemption orders. Some firms may establish higher minimum investment
requirements than set forth above. A firm may arrange with its clients for other
investment or administrative services. Such firms may independently establish
and charge additional amounts to their clients for such services, which charges
would reduce the clients' yield or return. Firms may also hold Fund shares in
nominee or street name as agent for and on behalf of their clients. In such
instances, the Fund's transfer agent will have no information with respect to or
control over the accounts of specific shareholders. Such shareholders may obtain
access to their accounts and information about their accounts only from their
firm. Certain of these firms may receive compensation from the Fund through the
Shareholder Service Agent for recordkeeping and other expenses relating to these
nominee accounts. In addition, certain privileges with respect to the purchase
and redemption of shares (such as check writing redemptions) or the reinvestment
of dividends may not be available through such firms or may only be available
subject to conditions and limitations. Some firms may participate in a program
allowing them access to their clients' accounts for
7
<PAGE> 11
servicing including, without limitation, transfers of registration and dividend
payee changes; and may perform functions such as generation of confirmation
statements and disbursement of cash dividends. Such firms, including affiliates
of the Fund's principal underwriter, may receive compensation from the Fund
through the Shareholder Service Agent for these services. The prospectus should
be read in connection with such firm's material regarding its fees and services.
OTHER INFORMATION. The Fund reserves the right to withdraw all or any part of
the offering made by this prospectus or to reject purchase orders. All orders to
purchase shares are subject to acceptance by the Fund and are not binding until
confirmed or accepted in writing. Any purchase that would result in total
account balances for a single shareholder in excess of $3 million is subject to
prior approval by the Fund. Share certificates are issued only on request to the
Fund. A $10 service fee will be charged when a check for purchase of Fund shares
is returned because of insufficient or uncollected funds or a stop payment
order.
Shareholders should direct their inquiries to the firm from which they received
this prospectus or to Kemper Service Company, the Fund's Shareholder Service
Agent, 811 Main Street, Kansas City, Missouri 64105-2005.
REDEMPTION OF SHARES
GENERAL. Upon receipt by the Shareholder Service Agent of a request in the form
described below, shares will be redeemed by the Fund at the next determined net
asset value. If processed at 3:00 p.m. Chicago time, the shareholder will
receive that day's dividend. A shareholder may use either the regular or
expedited redemption procedures. Shareholders who redeem all their shares of the
Fund will receive the net asset value of such shares and all declared but unpaid
dividends on such shares.
If shares of the Fund to be redeemed were purchased by check or through an
Automated Clearing House ("ACH") transaction, the Fund may delay transmittal of
redemption proceeds until it has determined that collected funds have been
received for the purchase of such shares, which will be up to 15 days from
receipt by the Fund of the purchase amount. Shareholders may not use expedited
redemption procedures (wire transfer or Redemption Check) until the shares being
redeemed have been owned for at least 15 days, and shareholders may not use such
procedures to redeem shares held in certificated form. There is no delay when
shares being redeemed were purchased by wiring Federal Funds.
If shares being redeemed were acquired from an exchange of shares of a mutual
fund that were offered subject to a contingent deferred sales charge as
described in the prospectus for that other fund, the redemption of such shares
by the Fund may be subject to a contingent deferred sales charge as explained in
such prospectus.
Shareholders can request the following telephone privileges: expedited wire
transfer redemptions, ACH transactions and exchange transactions for individual
and institutional accounts and pre-authorized telephone redemption transactions
for certain institutional accounts. Shareholders may choose these privileges on
the account application or by contacting the Shareholder Service Agent for
appropriate instructions. Please note that the telephone exchange privilege is
automatic unless the shareholder refuses it on the account application. The Fund
or its agents may be liable for any losses, expenses or costs arising out of any
fraudulent or unauthorized telephone requests pursuant to these privileges
unless the Fund and its agents reasonably believe, based upon reasonable
verification procedures, that the telephone instructions are genuine. THE
SHAREHOLDER WILL BEAR THE RISK OF LOSS, including loss resulting from fraudulent
or unauthorized transactions, so long as reasonable verification procedures are
followed. Verification procedures include recording instructions, requiring
certain identifying information before acting upon instructions and sending
written confirmations.
Because of the high cost of maintaining small accounts, the Fund reserves the
right to redeem an account that falls below the minimum investment level,
currently $1,000. A shareholder will be notified in writing and will be allowed
60 days to make additional purchases to bring the account value up to the
minimum investment level before the Fund redeems the shareholder account.
Firms provide varying arrangements for their clients to redeem Fund shares. Such
firms may independently establish and charge additional amounts to their clients
for such services.
8
<PAGE> 12
REGULAR REDEMPTIONS. Shareholders should contact the firm through which shares
were purchased for redemption instructions. However, when shares are held for
the account of a shareholder by the Fund's transfer agent, the shareholder may
redeem them by sending a written request with signatures guaranteed to Kemper
Service Company, P.O. Box 419153, Kansas City, Missouri 64141-6153. When
certificates for shares have been issued, they must be mailed to or deposited
with the Shareholder Service Agent, along with a duly endorsed stock power and
accompanied by a written request for redemption. Redemption requests and a stock
power must be endorsed by the account holder with signatures guaranteed by a
commercial bank, trust company, savings and loan association, federal savings
bank, member firm of a national securities exchange or other eligible financial
institution. The redemption request and stock power must be signed exactly as
the account is registered, including any special capacity of the registered
owner. Additional documentation may be requested, and a signature guarantee is
normally required, from institutional and fiduciary account holders, such as
corporations, custodians (e.g., under the Uniform Transfers to Minors Act),
executors, administrators, trustees or guardians.
TELEPHONE REDEMPTIONS. If the proceeds of the redemption are $50,000 or less and
the proceeds are payable to the shareholder of record at the address of record,
normally a telephone request or a written request by any one account holder
without a signature guarantee is sufficient for redemptions by individual or
joint account holders, and trust, executor and guardian account holders
(excluding custodial accounts for gifts and transfers to minors), provided the
trustee, executor or guardian is named in the account registration. Other
institutional account holders and guardian account holders may exercise this
special privilege of redeeming shares by telephone request or written request
without signature guarantee subject to the same conditions as individual account
holders, and subject to the limitations on liability described under "General"
above, provided that this privilege has been pre-authorized by the institutional
account holder or guardian account holder by written instruction to the
Shareholder Service Agent with signatures guaranteed. Shares purchased by check
or through an ACH transaction may not be redeemed under this privilege of
redeeming shares by telephone request until such shares have been owned for at
least 15 days. This privilege of redeeming shares by telephone request or by
written request without a signature guarantee may not be used to redeem shares
held in certificated form and may not be used if the shareholder's account has
had an address change within 30 days of the redemption request. During periods
when it is difficult to contact the Shareholder Service Agent by telephone, it
may be difficult to use the telephone redemption privilege although investors
can still redeem by mail. The Fund reserves the right to terminate or modify
this privilege at any time.
EXPEDITED WIRE TRANSFER REDEMPTIONS. If the account holder has given
authorization for expedited wire redemption to the account holder's brokerage or
bank account, shares of the Fund can be redeemed and proceeds sent by a federal
wire transfer to a single previously designated account. Requests received by
the Shareholder Service Agent prior to 11:00 a.m. Chicago time will result in
shares being redeemed that day and normally the proceeds will be sent to the
designated account that day. Once authorization is on file, the Shareholder
Service Agent will honor requests by telephone at 1-800-231-8568 or in writing,
subject to the limitations on liability described under "General" above. The
Fund is not responsible for the efficiency of the federal wire system or the
account holder's financial services firm or bank. The Fund currently does not
charge the account holder for wire transfers. The account holder is responsible
for any charges imposed by the account holder's firm or bank.There is a $1,000
wire redemption minimum. To change the designated account to receive wire
redemption proceeds, send a written request to the Shareholder Service Agent
with signatures guaranteed as described above, or contact the firm through which
shares of the Fund were purchased. Shares purchased by check or through an ACH
transaction may not be redeemed by wire transfer until the shares have been
owned for at least 15 days. Account holders may not use this privilege to redeem
shares held in certificated form. During periods when it is difficult to contact
the Shareholder Service Agent by telephone, it may be difficult to use the
expedited wire transfer redemption privilege. The Fund reserves the right to
terminate or modify this privilege at any time.
EXPEDITED REDEMPTIONS BY DRAFT. Upon request, shareholders will be provided
with drafts to be drawn on the Fund ("Redemption Checks"). These Redemption
Checks may be made payable to the order of any person for not more than $5
million. Shareholders should not write Redemption Checks in an amount less than
$250 since a $10 service fee will be charged as described below. When a
Redemption Check is presented for payment, a sufficient number of full and
fractional shares in the shareholder's account will be redeemed as of the next
determined net
9
<PAGE> 13
asset value to cover the amount of the Redemption Check. This will enable the
shareholder to continue earning dividends until the Fund receives the Redemption
Check. A shareholder wishing to use this method of redemption must complete and
file an Account Information Form which is available from the Fund or firms
through which shares were purchased. Redemption Checks should not be used to
close an account since the account normally includes accrued but unpaid
dividends. The Fund reserves the right to terminate or modify this privilege at
any time. This privilege may not be available through some firms that distribute
shares of the Fund. In addition, firms may impose minimum balance requirements
in order to obtain this feature. Firms may also impose fees to investors for
this privilege or establish variations of minimum check amounts if approved by
the Fund.
Unless one signer is authorized on the Account Information Form, Redemption
Checks must be signed by all account owners. Any change in the signature
authorization must be made by written notice to the Shareholder Service Agent.
Shares purchased by check or through an ACH transaction may not be redeemed by
Redemption Check until the shares have been owned for at least 15 days.
Shareholders may not use this procedure to redeem shares held in certificated
form. The Fund reserves the right to terminate or modify this privilege at any
time.
The Fund may refuse to honor Redemption Checks whenever the right of redemption
has been suspended or postponed, or whenever the account is otherwise impaired.
A $10 service fee will be charged when a Redemption Check is presented to redeem
Fund shares in excess of the value of a Fund account or in an amount less than
$250; when a Redemption Check is presented that would require redemption of
shares that were purchased by check or ACH transaction within 15 days; or when
"stop payment" of a Redemption Check is requested. Firms may charge different
service fees.
DIVIDENDS AND TAXES
DIVIDENDS. Dividends are declared daily and paid monthly. Shareholders may
select one of the following ways to receive dividends:
1. REINVEST DIVIDENDS at net asset value into additional shares of the Fund.
Dividends are normally reinvested on the 15th day of each month if a business
day, otherwise on the next business day. Dividends will be reinvested unless the
shareholder elects to receive them in cash.
2. RECEIVE DIVIDENDS IN CASH if so requested. Checks will be mailed monthly to
the shareholder or any person designated by the shareholder.
TAXES. The Fund intends to continue to qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code (the "Code") and, if so
qualified, will not be liable for federal income taxes to the extent its
earnings are distributed. The Fund also intends to meet the requirements of the
Code applicable to regulated investment companies distributing tax-exempt
interest dividends and, therefore, dividends representing net interest received
on Municipal Securities will not be includable by shareholders in their gross
income for federal income tax purposes, except to the extent such interest is
subject to the alternative minimum tax as discussed hereinafter. Dividends
representing taxable net investment income (such as net interest income from
temporary investments in obligations of the U.S. Government) and net short-term
capital gains, if any, are taxable to shareholders as ordinary income whether
received in cash or additional shares.
Dividends declared in October, November or December to shareholders of record as
of a date in one of those months and paid during the following January are
treated as paid on December 31 of the calendar year in which declared for
federal income tax purposes. The Fund may adjust its schedule for dividend
reinvestment for the month of December to assist it in complying with reporting
and minimum distribution requirements contained in the Code.
Net interest on certain "private activity bonds" issued on or after August 8,
1986 is treated as an item of tax preference and may, therefore, be subject to
both the individual and corporate alternative minimum tax. To the extent
provided by regulations to be issued by the Secretary of the Treasury,
exempt-interest dividends from the Fund are to be treated as interest on private
activity bonds in proportion to the interest the Fund receives from
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<PAGE> 14
private activity bonds, reduced by allowable deductions. For the 1995 calendar
year, no part of the net interest income of the Fund was derived from "private
activity bonds."
Exempt-interest dividends, except to the extent of interest from "private
activity bonds," are not treated as a tax preference item. For a corporate
shareholder, however, such dividends will be included in determining such
corporate shareholder's "adjusted current earnings." Seventy-five percent of the
excess, if any, of "adjusted current earnings" over the corporate shareholder's
other alternative minimum taxable income with certain adjustments will be a tax
preference item. Corporate shareholders are advised to consult their tax
advisers with respect to alternative minimum tax consequences.
Shareholders will be required to disclose on their federal income tax returns
the amount of tax-exempt interest earned during the year, including
exempt-interest dividends received from the Fund.
Individuals whose modified income exceeds a base amount will be subject to
federal income tax on up to 85% of their Social Security benefits. Modified
income includes adjusted gross income, tax-exempt interest, including
exempt-interest dividends from the Fund, and 50% of Social Security benefits.
Individuals are advised to consult their tax advisers with respect to the
taxation of Social Security benefits.
Dividends to the extent of interest income received on California state and
local government issues, will be exempt from State of California income taxes
provided at least 50% of the Fund's total assets are invested in such issues at
the close of each quarter in the taxable year. The tax exemption for federal and
California income tax purposes of dividends from the Fund does not necessarily
result in exemptions under the income or other tax laws of any state or local
taxing authority. The laws of the several states and local taxing authorities
vary with respect to the taxation of such income, and shareholders of the Fund
are advised to consult their own tax advisers in that regard and as to the
status of their accounts under state and local tax laws.
The Fund is required by law to withhold 31% of taxable dividends paid to certain
shareholders who do not furnish a correct taxpayer identification number (in the
case of individuals, a social security number) and in certain other
circumstances.
Shareholders normally will receive monthly confirmations of dividends and of
purchase and redemption transactions. Tax information will be provided annually.
Shareholders are encouraged to retain copies of their account confirmation
statements or year-end statements for tax reporting purposes. However, those who
have incomplete records may obtain historical account transaction information at
a reasonable fee.
INVESTMENT MANAGER AND SERVICES
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS"), 120 South LaSalle
Street, Chicago, Illinois 60603, is the investment manager of the Fund and
provides the Fund with continuous professional investment supervision. KFS is
one of the largest investment managers in the country and has been engaged in
the management of investment funds for more than forty-five years. KFS and its
affiliates provide investment advice and manage investment portfolios for
affiliated insurance companies, the Kemper Funds, and other corporate, pension,
profit-sharing and individual accounts representing approximately $63 billion
under management, including approximately $13 billion in money market assets and
$9 billion in tax-exempt assets. KFS acts as investment manager for 27 open-end
and seven closed-end investment companies, with 59 separate investment
portfolios, representing more than 3 million shareholder accounts. KFS is an
indirect subsidiary of Zurich Insurance Company, an internationally recognized
company providing services in life and non-life insurance, reinsurance and asset
management.
Responsibility for overall management of the Fund rests with its Board of
Trustees and officers. Professional investment supervision is provided by KFS.
The investment management agreement provides that KFS shall act as the Fund's
investment adviser, manage its investments and provide it with various services
and facilities. For the services and facilities furnished, the Fund pays an
annual investment management fee, payable monthly, on a
11
<PAGE> 15
graduated basis of .22 of 1% of the first $500 million of average daily net
assets, .20 of 1% of the next $500 million, .175 of 1% of the next $1 billion,
.16 of 1% of the next $1 billion and .15 of 1% of average daily net assets over
$3 billion.
DISTRIBUTOR. Pursuant to an administration, shareholder services and
distribution agreement ("distribution agreement"), Kemper Distributors, Inc.
("KDI"), 120 South LaSalle Street, Chicago, Illinois 60603, an affiliate of KFS,
serves as distributor, administrator and principal underwriter of the Fund to
provide information and administrative and distribution services for existing
and potential shareholders. The distribution agreement provides that KDI shall
act as agent for the Fund for the sale of its shares and shall appoint various
financial services firms ("firms"), such as broker-dealers and banks, to provide
cash management services for their customers or clients through the Fund. The
firms are to provide such office space and equipment, telephone facilities,
personnel and sales literature distribution as is necessary or appropriate for
providing information and services to the firm's clients. For its services under
the distribution agreement, the Fund pays KDI an annual distribution services
fee, payable monthly, of .33 of 1% of average daily net assets of the Fund. The
fee is accrued daily as an expense of the Fund.
KDI has related administration services and selling group agreements with
various broker-dealer firms to provide cash management and other services for
Fund shareholders. KDI also has services agreements with banking firms to
provide such services, except for certain underwriting or distribution services
which the banks may be prohibited from providing under the Glass-Steagall Act,
for their clients who wish to invest in the Fund. If the Glass-Steagall Act
should prevent banking firms from acting in any capacity or providing any of the
described services, management will consider what action, if any, is
appropriate. Management does not believe that termination of a relationship with
a bank would result in any material adverse consequences to the Fund. Banks or
other financial services firms may be subject to various state laws regarding
the services described above and may be required to register as dealers pursuant
to state law. KDI normally pays the firms at an annual rate ranging from .15 of
1% to .33 of 1% of average daily net assets of those accounts that they maintain
and service. KDI may elect to keep a portion of the total distribution services
fee to compensate itself for functions performed for the Fund or to pay for
sales materials or other promotional activities. Since the distribution
agreement provides for fees that are used by KDI to pay for distribution and
administration services, the agreement along with the related administration
services and selling group agreements and the plan contained therein are
approved and reviewed in accordance with Rule 12b-1 under the 1940 Act, which
regulates the manner in which an investment company may, directly or indirectly,
bear the expenses of distributing its shares.
Since the fee payable to KDI under the distribution agreement is based upon a
percentage of the average daily net assets of the Fund and not upon the actual
expenditures of KDI, the expenses of KDI (which may include overhead expense)
may be more or less than the fees received by it under the distribution
agreement. For example, during the fiscal year ended September 30, 1995, KDI
(KFS was predecessor to KDI prior to February 1, 1995) incurred expenses under
the distribution agreement of approximately $340,000, while it received an
aggregate fee under the distribution agreement of $325,000. If the distribution
agreement is terminated in accordance with its terms, the obligation of the Fund
to make payments to KDI pursuant to the distribution agreement will cease and
the Fund will not be required to make any payments past the termination date.
Thus, there is no legal obligation for the Fund to pay any excess expenses
incurred by KDI over its fees under the distribution agreement if, for any
reason, the distribution agreement is terminated in accordance with its terms.
Any cumulative expenses incurred by KDI in excess of fees received may or may
not be recovered through future fees under the distribution agreement.
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund. IFTC
also is the Fund's transfer and dividend-paying agent. Pursuant to a
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<PAGE> 16
services agreement with IFTC, Kemper Service Company, 811 Main Street, Kansas
City, Missouri 64105, an affiliate of KFS, serves as Shareholder Service Agent
of the Fund and, as such, performs all of IFTC's duties as transfer agent and
dividend-paying agent. For a description of custodian, transfer agent and
shareholder service agent fees, see "Investment Manager and Services" in the
Statement of Additional Information.
SPECIAL FEATURES
Certain firms that offer shares of the Fund also provide special redemption
features through charge or debit cards and checks that redeem Fund shares.
Various firms have different charges for their services. Shareholders should
obtain information from their firm with respect to any special redemption
features, applicable charges, minimum balance requirements and any special rules
of the cash management program being offered.
Information about the following special features is contained in the Statement
of Additional Information; and further information may be obtained without
charge from KDI: Exchange Privilege; Systematic Exchange Privilege; Systematic
Withdrawal Program and Electronic Funds Transfer Programs.
PERFORMANCE
The Fund may advertise several types of performance information including
"yield," "effective yield," and "tax equivalent yield." Each of these figures is
based upon historical earnings and is not necessarily representative of the
future performance of the Fund. The yield of the Fund refers to the net
investment income generated by a hypothetical investment in the Fund over a
specific seven-day period. This net investment income is then annualized, which
means that the net investment income generated during the seven-day period is
assumed to be generated each week over an annual period and is shown as a
percentage of the investment. The effective yield is calculated similarly, but
the net investment income earned by the investment is assumed to be compounded
weekly when annualized. The effective yield will be slightly higher than the
yield due to this compounding effect. Tax equivalent yield is the yield that a
taxable investment must generate in order to equal the Fund's yield for an
investor in a stated federal and State of California income tax bracket
(normally assumed to be the maximum tax rate). Tax equivalent yield is based
upon, and will be higher than, the portion of the Fund's yield that is
tax-exempt.
The Fund's performance may be compared to that of other money market mutual
funds or mutual fund indexes as reported by independent mutual fund reporting
services such as Lipper Analytical Services, Inc. ("Lipper"). The Fund's
performance and its relative size also may be compared to other money market
mutual funds as reported by IBC/Donoghue's Money Fund Report(R) or Money Market
Insight(R), reporting services on money market funds. Investors may want to
compare the Fund's performance on an after-tax basis to various certificate of
deposit indexes or to that of various bank products as reported by BANK RATE
MONITOR(TM), a financial reporting service that weekly publishes average rates
of bank and thrift institution money market deposit accounts and interest
bearing checking accounts. The performance of the Fund also may be compared on
an after tax basis to that of U.S. Treasury bills and notes. Certain of these
alternative investments may offer fixed rates of return and guaranteed
principal and may be insured. In addition, investors may want to compare the
Fund's performance to the Consumer Price Index either directly or by
calculating its "real rate of return," which is adjusted for the effects of
inflation.
Information may be quoted from publications such as Morningstar, Inc., The Wall
Street Journal, Money Magazine, Forbes, Barron's, Fortune, The Chicago Tribune,
USA Today, Institutional Investor and Registered Representative. The Fund may
also describe its portfolio holdings and depict its size or relative size
compared to other mutual funds, the number and make-up of its shareholder base
and other descriptive factors concerning the Fund.
The Fund's yield will fluctuate. Shares of the Fund are not insured. Additional
information concerning the Fund's performance appears in the Statement of
Additional Information.
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<PAGE> 17
CAPITAL STRUCTURE
The Fund is an open-end diversified management investment company, organized as
a business trust under the laws of Massachusetts on February 25, 1987. The Fund
may issue an unlimited number of shares of beneficial interest in one or more
series or "Portfolios," all having no par value. While only shares of a single
Portfolio are presently being offered, the Board of Trustees may authorize the
issuance of additional Portfolios if deemed desirable, each with its own
investment objective, policies and restrictions. Since the Fund may offer
multiple Portfolios, it is known as a "series company." Shares of a Portfolio
have equal noncumulative voting rights and equal rights with respect to
dividends, assets and liquidation of such Portfolio. Shares are fully paid and
nonassessable when issued, are transferable without restriction and have no
preemptive or conversion rights. The Fund is not required to hold annual
shareholders' meetings and does not intend to do so. However, it will hold
special meetings as required or deemed desirable for such purposes as electing
trustees, changing fundamental policies or approving an investment management
agreement. Subject to the Agreement and Declaration of Trust of the Fund,
shareholders may remove trustees. If shares of more than one Portfolio are
outstanding, shareholders will vote by Portfolio and not in the aggregate except
when voting in the aggregate is required under the 1940 Act, such as for the
election of trustees.
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<PAGE> 18
TECM 2/96
TAX-EXEMPT
CALIFORNIA
MONEY MARKET
FUND
PROSPECTUS
FEBRUARY 1, 1996
[RECYCLE LOGO] printed on recycled paper
<PAGE> 19
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
CROSS-REFERENCE SHEET
BETWEEN ITEMS ENUMERATED IN PART B
OF FORM N-1A AND STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
ITEM NUMBER LOCATION IN STATEMENT OF
OF FORM N-1A ADDITIONAL INFORMATION
------------ ------------------------
<S> <C> <C>
10. Cover Page............................... Cover Page
11. Table of Contents........................ Table of Contents
12. General Information and History.......... Inapplicable
13. Investment Objectives and Policies....... Municipal Securities; Investment
Restrictions;
Appendix--Ratings of Investments
14. Management of the Fund................... Investment Manager and Services;
Officers and Trustees
15. Control Persons and Principal Holders of
Securities............................... Officers and Trustees
16. Investment Advisory and Other Services... Investment Manager and Services
17. Brokerage Allocation and Other
Practices................................ Portfolio Transactions
18. Capital Stock and Other Securities....... Dividends, Net Asset Value and Taxes;
Shareholder Rights
19. Purchase, Redemption and Pricing of
Securities Being Offered................. Purchase and Redemption of Shares
20. Tax Status............................... Dividends, Net Asset Value and Taxes
21. Underwriters............................. Investment Manager and Services
22. Calculations of Performance Data......... Performance
23. Financial Statements..................... Financial Statements
</TABLE>
<PAGE> 20
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 1996
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
120 SOUTH LASALLE STREET, CHICAGO, ILLINOIS 60603
1-800-231-8568
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the prospectus of Tax-Exempt California Money Market Fund
(the "Fund") dated February 1, 1996. The prospectus may be obtained without
charge from the Fund.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
Municipal Securities............................................... B-2
Investment Restrictions............................................ B-4
Investment Manager and Services.................................... B-5
Portfolio Transactions............................................. B-7
Purchase and Redemption of Shares.................................. B-8
Dividends, Net Asset Value and Taxes............................... B-8
Performance........................................................ B-10
Officers and Trustees.............................................. B-13
Special Features................................................... B-15
Shareholder Rights................................................. B-16
Appendix--Ratings of Investments................................... B-18
</TABLE>
The financial statements appearing in the Fund's 1995 Annual Report to
Shareholders are incorporated herein by reference. The Fund's Annual Report to
Shareholders accompanies this Statement of Additional Information.
TECM 33 2/96 (LOGO)printed on recycled paper
B-1
<PAGE> 21
MUNICIPAL SECURITIES
Municipal Securities that the Fund may purchase include, without limitation,
debt obligations issued to obtain funds for various public purposes, including
the construction of a wide range of public facilities such as airports, bridges,
highways, housing, hospitals, mass transportation, public utilities, schools,
streets, and water and sewer works. Other public purposes for which Municipal
Securities may be issued include refunding outstanding obligations, obtaining
funds for general operating expenses and obtaining funds to loan to other public
institutions and facilities.
Municipal Securities, such as industrial development bonds, are issued by or on
behalf of public authorities to obtain funds for purposes including privately
operated airports, housing, conventions, trade shows, ports, sports, parking or
pollution control facilities or for facilities for water, gas, electricity or
sewage and solid waste disposal. Such obligations, which may include lease
arrangements, are included within the term Municipal Securities if the interest
paid thereon qualifies as exempt from federal income tax. Other types of
industrial development bonds, the proceeds of which are used for the
construction, equipment, repair or improvement of privately operated industrial
or commercial facilities, may constitute Municipal Securities, although the
current federal tax laws place substantial limitations on the size of such
issues.
Municipal Securities generally are classified as "general obligation" or
"revenue." General obligation notes are secured by the issuer's pledge of its
faith, credit and taxing power for the payment of principal and interest.
Revenue notes are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Industrial development bonds
which are Municipal Securities are in most cases revenue bonds and generally do
not constitute the pledge of the credit of the issuer of such bonds.
Examples of Municipal Securities which are issued with original maturities of
one year or less are short-term tax anticipation notes, bond anticipation notes,
revenue anticipation notes, construction loan notes, pre-refunded municipal
bonds, warrants and tax-free commercial paper.
Tax anticipation notes typically are sold to finance working capital needs of
municipalities in anticipation of receiving property taxes on a future date.
Bond anticipation notes are sold on an interim basis in anticipation of a
municipality issuing a longer term bond in the future. Revenue anticipation
notes are issued in expectation of receipt of other types of revenue such as
those available under the Federal Revenue Sharing Program. Construction loan
notes are instruments insured by the Federal Housing Administration with
permanent financing by "Fannie Mae" (the Federal National Mortgage Association)
or "Ginnie Mae" (the Government National Mortgage Association) at the end of the
project construction period. Pre-refunded municipal bonds are bonds that are not
yet refundable, but for which securities have been placed in escrow to refund an
original municipal bond issue when it becomes refundable. Tax-free commercial
paper is an unsecured promissory obligation issued or guaranteed by a municipal
issuer. The Fund may purchase other Municipal Securities similar to the
foregoing that are or may become available, including securities issued to
pre-refund other outstanding obligations of municipal issuers.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain circumstances, such subdivisions or authorities may be
authorized to initiate bankruptcy proceedings without prior notice to or consent
of creditors, which proceedings could result in material and adverse changes in
the rights of holders of obligations issued by such subdivisions or authorities.
Litigation challenging the validity under state constitutions of present systems
of financing public education has been initiated or adjudicated in a number of
states, and legislation has been introduced to effect changes in public school
finances in some states. In other instances there has been litigation
challenging the issuance of pollution control revenue bonds or the validity of
their issuance under state or federal law, which litigation ultimately could
affect the validity of those Municipal Securities or the tax-free nature of the
interest thereon.
The following information as to certain California risk factors is given to
investors because the Fund concentrates its investments in California state and
local municipal securities. Such information constitutes only a summary, does
B-2
<PAGE> 22
not purport to be a complete description and is based upon information from
official statements relating to securities offerings of California issuers.
In recent years, California voters have approved a number of changes to the
State constitution that have limited the ability of State and local issuers to
raise revenues and adjust appropriations.
In 1978, California voters approved Proposition 13 which added Article XIII A to
the California Constitution. Article XIII A changed the definition of assessed
property value and placed restrictions on a taxing entity's ability to increase
real property taxes. In 1979, voters also approved Proposition 4, the so-called
Gann Initiative, which added Article XIII B to the California Constitution. The
purpose of Article XIII B was to limit the annual appropriations of the State
and any local government unit to the level of appropriations for the prior year,
as adjusted for changes in cost of living, population and services required.
Article XIII B also specified that debt service obligations incurred prior to
January 1, 1979 were excluded from the appropriations limits.
In the general elections of 1986, 1988, and 1990, California voters approved
various measures that amended Article XIII A and XIII B. Propositions 58 and 60
clarified the definitions of "purchased property" and "change of ownership"
found in Article XIII A. Proposition 98, in addition to guaranteeing a percent
of State funding for public schools, modified Article XIII B to permit excess
State revenues to be transferred to public schools and community colleges rather
than returned to taxpayers. Finally, Proposition 111 amended Article XIII B to
ease restrictions on certain expenditure categories in calculating the annual
appropriation ceiling.
Future voter initiatives, if proposed and adopted, could further modify Articles
XIII A and XIII B and place increased pressures on the ability of State and
local entities to raise revenue and increase appropriations.
The State of California has underperformed the national economy since 1990.
Defense realignment programs and a severely depressed construction industry
resulted in substantial job losses in most employment sectors. The financial
impact on the State was dramatic. Negative operating results in fiscal years
1990 through 1992 produced an accumulated general fund deficit of $2.8 billion.
Budgetary actions taken in fiscal year 1994 and 1995 substantially reduced the
accumulated deficit. The adopted budget for the 1996 fiscal year forecasts a
surplus to be achieved by June 30, 1996. This forecast relies on a continuation
of the current economic recovery.
California continues to show signs of an economic recovery according to UCLA
Business Forecasting Project. Their report notes that the California economy is
now generating new jobs at a faster rate than the nation and predicts this
pattern to continue through 1997. At the current pace, California will have
regained nearly all the jobs lost during the recent recession.
California's recent recession prompted a number of reductions in the State's
general obligation bond rating. Between February 1992 and August 1994, Moody's
lowered the State's bond rating from Aaa to A1. During a similar period, S&P
reduced the State's general obligation bond rating from AAA to A. Investors may
wish to monitor changes in ratings by the rating agencies. As of January 5,
1996, Fitch Investor Services assigned an "A" rating to the State's general
obligation bonds.
Recent State budgets have included large cuts in local government transfer
payments. These reductions may cause deterioration in local issuer financial
performance and result in reduced bond ratings for some local government
issuers.
On December 6, 1994, Orange County, California filed for bankruptcy protection
under Chapter 9 of the United States Bankruptcy Code. The State of California
thereafter enacted legislation designed to assist Orange County in the
resolution of the bankruptcy. On December 21, 1995, Orange County filed a Plan
of Adjustment that relies on such legislation to implement and fund the Plan.
Subject to certain limited exceptions, the Plan generally provides for payment
of the County's public indebtedness in accordance with the terms thereof or as
otherwise agreed. However, the ability of Orange County to confirm and implement
this Plan is still uncertain.
B-3
<PAGE> 23
Although the Orange County bankruptcy has affected the California municipal
market by increased cost of financing for certain California issuers, the
California municipal market, in general, has continued to function with adequate
liquidity.
INVESTMENT RESTRICTIONS
The Fund has adopted certain investment restrictions which cannot be changed
without approval by holders of a majority of its outstanding voting shares. As
defined in the Investment Company Act of 1940, this means the lesser of the vote
of (a) 67% of the Fund's shares present at a meeting where more than 50% of the
outstanding shares are present in person or by proxy; or (b) more than 50% of
the Fund's shares.
The Fund may not:
(1) Purchase securities or make investments other than in accordance with its
investment objective and policies.
(2) Purchase securities (other than securities of the United States Government,
its agencies or instrumentalities or of a state or its political subdivisions)
if as a result of such purchase more than 25% of the Fund's total assets would
be invested in any one industry.
(3) 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 Fund's total assets would be invested in securities
of that issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation. For purposes of this
limitation, the Fund will regard the entity which has the primary responsibility
for the payment of interest and principal as the issuer.
(4) Invest more than 10% of its total assets in illiquid securities, including
repurchase agreements maturing in more than seven days.
(5) Invest more than 5% of the Fund's total assets in industrial development
bonds sponsored by companies which with their predecessors have less than three
years' continuous operation.
(6) Make loans to others (except through the purchase of debt obligations or
repurchase agreements in accordance with its investment objective and policies).
(7) Borrow money except from banks for temporary purposes (but not for the
purpose of purchase of investments) and then only in an amount not to exceed
one-third of the value of the Fund's total assets (including the amount
borrowed) in order to meet redemption requests which otherwise might result in
the untimely disposition of securities; or pledge the Fund's securities or
receivables or transfer or assign or otherwise encumber them in an amount to
exceed 10% of the Fund's net assets to secure borrowings. Reverse repurchase
agreements made by the Portfolio are permitted within the limitations of this
paragraph. The Fund will not purchase securities or make investments while
reverse repurchase agreements or borrowings are outstanding.
(8) Make short sales of securities or purchase securities on margin, except to
obtain such short-term credits as may be necessary for the clearance of
transactions.
(9) Write, purchase or sell puts, calls or combinations thereof, although the
Fund may purchase Municipal Securities subject to Standby Commitments, Variable
Rate Demand Notes or Repurchase Agreements in accordance with its investment
objective and policies.
(10) Purchase or retain the securities of any issuer if any of the officers,
trustees or directors of the Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer and together own more than
5% of the securities of such issuer.
(11) Invest for the purpose of exercising control or management of another
issuer.
(12) Invest in commodities or commodity futures contracts or in real estate
except that the Fund may invest in Municipal Securities secured by real estate
or interests therein and securities of issuers which invest or deal in real
estate.
B-4
<PAGE> 24
(13) Invest in interests in oil, gas or other mineral exploration or development
programs, although it may invest in Municipal Securities of issuers which invest
in or sponsor such programs.
(14) Purchase securities of other investment companies, except in connection
with a merger, consolidation, reorganization or acquisition of assets.
(15) 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.
(16) Issue senior securities as defined in the Investment Company Act of 1940.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage beyond the specified limit resulting from a
change in values or net assets will not be considered a violation. The Fund may
invest more than 25% of its total assets in industrial development bonds. The
Fund did not borrow money as permitted by investment restriction number 7 during
its latest fiscal year, and it has no present intention of borrowing during the
current year.
INVESTMENT MANAGER AND SERVICES
INVESTMENT MANAGER. Kemper Financial Services, Inc. ("KFS") is the Fund's
investment manager. KFS is wholly-owned by KFS Holding Corp. KFS Holding Corp.
is a more than 90% owned subsidiary of Zurich Holding Company of America, Inc.,
which is a wholly-owned subsidiary of Zurich Insurance Company, an
internationally recognized company providing services in life and non-life
insurance, reinsurance and asset management. Pursuant to an investment
management agreement, KFS acts as the Fund's investment adviser, manages its
investments, administers its business affairs, furnishes office facilities and
equipment, provides clerical, bookkeeping and administrative services and
permits any of its officers or employees to serve without compensation as
trustees or officers of the Fund if elected to such positions. The Fund pays the
expenses of its operations, including the fees and expenses of independent
auditors, counsel, custodian and transfer agent and the cost of share
certificates, reports and notices to shareholders, costs of calculating net
asset value, brokerage commissions or transaction costs, taxes, registration
fees, the fees and expenses of qualifying the Fund and its shares for
distribution under federal and state securities laws and membership dues in the
Investment Company Institute or any similar organization.
The agreement provides that KFS shall not be liable for any error of judgment or
of law, or for any loss suffered by the Fund in connection with the matters to
which the agreement relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on the part of KFS in the performance of its
obligations and duties, or by reason of its reckless disregard of its
obligations and duties under the agreement.
The investment management agreement continues in effect from year to year so
long as its continuation is approved at least annually by a majority vote of the
trustees who are not parties to such agreement or interested persons of any such
party except in their capacity as trustees of the Fund, cast in person at a
meeting called for such purpose, and by the shareholders or the Board of
Trustees. It may be terminated at any time upon 60 days notice by either party,
or by a majority vote of the outstanding shares, and will terminate
automatically upon assignment. If additional Fund Portfolios become subject to
the investment management agreement, the provisions concerning continuation,
amendment and termination shall be on a Portfolio by Portfolio basis and the
management fee and the expense limitation shall be computed based upon the
average daily net assets of all Portfolios subject to the agreement and shall be
allocated among such Portfolios based upon the relative net assets of such
Portfolios. Additional Portfolios may be subject to a different agreement.
For the services and facilities furnished, the Fund pays an annual investment
management fee, payable monthly, on a graduated basis of .22 of 1% of the first
$500 million of average daily net assets, .20 of 1% of the next $500 million,
.175 of 1% of the next $1 billion, .16 of 1% of the next $1 billion and .15 of
1% of average daily net assets over $3 billion. Pursuant to the investment
management agreement, the Fund paid KFS fees of $217,000, $247,000 and $278,000
for the fiscal years ended September 30, 1995, 1994 and 1993, respectively. KFS
has agreed to reimburse the Fund to the extent required by applicable state
expense limitations should all operating expenses of the Fund, including the
investment management fee of KFS but excluding taxes, interest, the distribution
services fees of KDI (described below), extraordinary expenses and brokerage
commissions or transaction costs, exceed the
B-5
<PAGE> 25
applicable state expense limitations. The Fund believes that the most
restrictive state expense limitation currently applicable to the Fund would
require that such operating expenses not exceed 2.5% of the first $30 million of
average daily net assets, 2% of the next $70 million and 1.5% of average daily
net assets over $100 million.
DISTRIBUTOR. Pursuant to a distribution services agreement ("distribution
agreement"), Kemper Distributors, Inc. ("KDI"), an affiliate of KFS, serves as
distributor, administrator and principal underwriter to the Fund to provide
information and services for existing and potential shareholders. The
distribution agreement provides that KDI shall act as agent for the Fund in the
sale of its shares and shall appoint various firms to provide a cash management
service for their customers or clients through the Fund. The firms are to
provide such office space and equipment, telephone facilities, personnel and
sales literature distribution as is necessary or appropriate for providing
information and services to the firms' clients and prospective clients. The Fund
pays for the prospectus and shareholder reports to be set in type and printed
for existing shareholders and KDI pays for the printing and distribution of
copies thereof used in connection with the offering of shares to prospective
investors. KDI pays for supplementary sales literature and advertising. For its
services as distributor, the Fund pays KDI an annual distribution services fee,
payable monthly, of .33 of 1% of average daily net assets of the Fund. The
distribution agreement continues in effect from year to year so long as its
continuation is approved at least annually by a majority of the trustees who are
not parties to such agreement or interested persons of the Fund and who have no
direct or indirect financial interest in the agreement or in any agreement
related thereto. The agreement automatically terminates in the event of its
assignment and may be terminated at any time without penalty by the Fund or by
KDI upon 60 days' notice. Termination by the Fund may be by vote of a majority
of the Board of Trustees, or a majority of the Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
agreement, or a majority vote of the outstanding shares. The fee payable
pursuant to the distribution agreement may not be increased without shareholder
approval and all material amendments must in any event be approved by the Board
of Trustees in the manner described above with respect to the continuation of
the agreement. If additional Portfolios are authorized by the Board of Trustees,
the provisions concerning the continuation, amendment and termination of the
distribution services agreement will be on a Portfolio by Portfolio basis.
KDI has related administration services and selling group agreements with
various broker-dealer firms to provide cash management and other services for
the Fund shareholders. Such services and assistance may include, but are not
limited to, establishing and maintaining shareholder accounts and records,
processing purchase and redemption transactions, providing automatic investment
in Fund shares of client account balances, answering routine inquiries regarding
the Fund, assisting clients in changing account options, designations and
addresses, and such other services as may be agreed upon from time to time and
as may be permitted by applicable statute, rule or regulation. KDI also has
services agreements with banking firms to provide the above listed services,
except for certain distribution services which the banks may be prohibited from
providing, for their clients who wish to invest in the Fund. KDI also may
provide some of the above services for the Fund. KDI normally pays the firms at
an annual rate ranging from .15 of 1% to .33 of 1% of average net assets of
those accounts that they maintain and service. KDI may elect to keep a portion
of the total administration fee to compensate itself for functions performed for
the Fund or to pay for sales materials or other promotional activities.
Since the distribution agreement provides for fees which are used by KDI to pay
for distribution and administration services, the agreement along with the
related administration services and selling group agreements are approved and
renewed in accordance with Rule 12b-1 under the Investment Company Act of 1940
which regulates the manner in which an investment company may, directly or
indirectly, bear expenses of distributing its shares.
For the fiscal year ended September 30, 1995, the Fund incurred distribution
fees of $325,000. Of such amount, KDI (KFS was predecessor to KDI prior to
February 1, 1995) remitted $324,000 to various firms, $247,000 of which was paid
to broker-dealer firms affiliated with KDI, pursuant to the related services
agreements. For the fiscal year ended September 30, 1995, KDI (or KFS as
predecessor to KDI) incurred underwriting, distribution and administrative
expenses in the approximate amounts noted: service fees to firms ($324,000);
advertising and literature ($1,000); prospectus printing ($2,000); and marketing
and sales expenses ($13,000); for a total of $340,000. A portion of the
aforesaid marketing, sales and operating expenses could be considered overhead
B-6
<PAGE> 26
expense; however, KDI has made no attempt to differentiate between expenses that
are overhead and those that are not.
Certain trustees or officers of the Fund are also directors or officers of KFS
and KDI as indicated under "Officers and Trustees."
CUSTODIAN, TRANSFER AGENT AND SHAREHOLDER SERVICE AGENT. Investors Fiduciary
Trust Company ("IFTC"), 127 West 10th Street, Kansas City, Missouri 64105, as
custodian, and State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, as sub-custodian, have custody of all securities and cash
of the Fund. They attend to the collection of principal and income, and payment
for and collection of proceeds of securities bought and sold by the Fund. IFTC
is the transfer agent of the Fund (see "Purchase of Shares" in the prospectus).
Pursuant to a services agreement with IFTC, Kemper Service Company ("KSvC"), an
affiliate of KFS, serves as "Shareholder Service Agent" of the Fund. IFTC
receives, as transfer agent, and pays to KSvC annual account fees of a maximum
of $13 per account plus disaster recovery charges and out-of-pocket expense
reimbursement. For the fiscal year ended September 30, 1995, IFTC remitted fees
in the amount of $60,000 to KSvC as Shareholder Service Agent. Everen Clearing
Corp. (ECC), formerly Kemper Clearing Corp., was an affiliate of the Adviser
until September 13, 1995. Pursuant to an agreement with KSvC, ECC performs
bookkeeping, data processing and administration services for ECC clients who are
shareholders of the Fund. For shareholder services, ECC receives a fee from KSvC
at the maximum rate of $9 per year per account and certain out-of-pocket expense
reimbursements. For the fiscal year ended September 30, 1995, ECC received
$40,000 from KSvC for account maintenance fees.
INDEPENDENT AUDITORS AND REPORTS TO SHAREHOLDERS. The Fund's independent
auditors, Ernst & Young LLP, 233 South Wacker Drive, Chicago, Illinois 60606,
audit and report on the Fund's annual financial statements, review certain
regulatory reports and the Fund's federal income tax return, and perform other
professional accounting, auditing, tax and advisory services when engaged to do
so by the Fund. Shareholders will receive annual audited financial statements
and semi-annual unaudited financial statements.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken principally to pursue the Fund's
investment objective in relation to movements in the general level of interest
rates, to invest money obtained from the sale of Fund shares, to reinvest
proceeds from maturing portfolio securities and to meet redemptions of Fund
shares. These transactions may increase or decrease the yield of the Fund
depending upon management's ability to correctly time and execute such
transactions. Since the Fund's assets will be invested in short-term Municipal
Securities, its portfolio will turn over several times a year. However, since
securities with maturities of less than one year are excluded from required
portfolio turnover rate calculations, the Fund's turnover rate for reporting
purposes will be zero.
KFS is the investment manager for the Kemper Funds and KFS and its affiliates
also furnish investment advice to other clients including affiliated insurance
companies. KFS is the sole shareholder of Zurich Investment Management, Inc. and
Kemper Investment Management Company Limited. These three entities share some
common research and trading facilities. Dreman Value Advisors, Inc. ("DVA"), a
wholly owned subsidiary of KFS, is the investment manager for Kemper-Dreman
Fund, Inc. and sub-adviser for other Kemper Funds. At times investment decisions
may be made to purchase or sell the same investment security for the Fund and
for one or more of the other clients of KFS or its affiliates. When two or more
of such clients are simultaneously engaged in the purchase or sale of the same
security through the same trading facility, the transactions are allocated as to
amount and price in a manner considered equitable to each.
KFS, in effecting purchases and sales of portfolio securities for the account of
the Fund, will implement the Fund's policy of seeking the best execution of
orders, which includes best net prices. Consistent with this policy, orders for
portfolio transactions are placed with broker-dealer firms giving consideration
to the quality, quantity and nature of the firm's professional services which
include execution, clearance procedures, reliability and other factors. In
selecting among the firms believed to meet the criteria for handling a
particular transaction, KFS may give consideration to those firms that provide
market, statistical and other research information to the Fund and KFS, although
KFS is not authorized to pay higher prices to firms that provide such services.
Any research benefits
B-7
<PAGE> 27
derived are available for all clients, including clients of affiliated
companies. Since it is only supplemental to KFS's own research efforts and must
be analyzed and reviewed by KFS's staff, the receipt of research information is
not expected to materially reduce expenses. The Fund expects that purchases and
sales of portfolio securities usually will be principal transactions. Portfolio
securities will normally be purchased directly from the issuer or from an
underwriter or market maker for the securities. There usually are no brokerage
commissions paid by the Fund for such purchases and none have been paid during
the Fund's last three fiscal years. Purchases from underwriters will include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers will include the spread between the bid
and asked prices.
PURCHASE AND REDEMPTION OF SHARES
Fund shares are sold at their net asset value next determined after an order and
payment are received in the form described in the Fund's prospectus. The minimum
initial investment is $1,000 and the minimum subsequent investment is $100 but
such minimum amounts may be changed at any time. See the prospectus for certain
exceptions to these minimums. The Fund may waive the minimum for purchases by
trustees, directors, officers or employees of the Fund or KFS and its
affiliates. An investor wishing to open an account should use the Account
Information Form available from the Fund or financial services firms. Orders for
the purchase of shares that are accompanied by a check drawn on a foreign bank
(other than a check drawn on a Canadian bank in U.S. Dollars) will not be
considered in proper form and will not be processed unless and until the Fund
determines that it has received payment of the proceeds of the check. The time
required for such a determination will vary and cannot be determined in advance.
Upon receipt by the Shareholder Service Agent (see "Purchase of Shares" in the
prospectus) of a request for redemption in proper form, shares will be redeemed
by the Fund at the applicable net asset value as described in the Fund's
prospectus. A shareholder may elect to use either the regular or expedited
redemption procedures.
The Fund may suspend the right of redemption or delay payment more than seven
days (a) during any period when the New York Stock Exchange ("Exchange") is
closed other than customary weekend and holiday closings or during any period in
which trading on the Exchange is restricted, (b) during any period when an
emergency exists as a result of which (i) disposal of the Fund's investments is
not reasonably practicable or (ii) it is not reasonably practicable for the Fund
to determine the value of its net assets, or (c) for such other periods as the
Securities and Exchange Commission may by order permit for protection of the
Fund's shareholders.
Although it is the Fund's present policy to redeem in cash, if the Board of
Trustees determines that a material adverse effect would be experienced by the
remaining shareholders if payment were made wholly in cash, the Fund will pay
the redemption price in whole or in part by a distribution of portfolio
securities in lieu of cash, in conformity with the applicable rules of the
Securities and Exchange Commission, taking such securities at the same value
used to determine net asset value, and selecting the securities in such manner
as the Board of Trustees may deem fair and equitable. If such a distribution
occurs, shareholders receiving securities and selling them could receive less
than the redemption value of such securities and in addition would incur certain
transaction costs. Such a redemption would not be so liquid as a redemption
entirely in cash. The Fund has elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940 pursuant to which the Fund is obligated to redeem
shares solely in cash up to the lesser of $250,000 or 1% of the net assets of
the Fund during any 90-day period for any one shareholder of record.
DIVIDENDS, NET ASSET VALUE AND TAXES
DIVIDENDS. Dividends are declared daily and paid monthly. Shareholders will
receive dividends in additional shares unless they elect to receive cash.
Dividends will be reinvested monthly in shares of the Fund normally on the
fifteenth day of each month, if a business day, otherwise on the next business
day. The Fund will pay shareholders who redeem their entire accounts all unpaid
dividends at the time of redemption not later than the next dividend payment
date. Upon written request to the Shareholder Service Agent, a shareholder may
elect to have Fund dividends invested without sales charge in shares of another
Kemper Fund offering this privilege at the net asset value of such other fund.
See "Special Features--Exchange Privilege" for a list of such other Kemper
Funds. To use
B-8
<PAGE> 28
this privilege of investing Fund dividends in shares of another Kemper Fund,
shareholders must maintain either a minimum account value of $10,000 in this
Fund or a minimum account value of $1,000 in the fund in which dividends are
reinvested.
The Fund calculates its dividends based on its daily net investment income. For
this purpose, net investment income consists of (a) accrued interest income plus
or minus amortized original issue discount or premium, (b) plus or minus all
short-term realized gains and losses on investments and (c) minus accrued
expenses. Expenses of the Fund are accrued each day. Since the Fund's
investments are valued at amortized cost, there will be no unrealized gains or
losses on such investments. However, should the net asset value so computed
deviate significantly from market value, the Board of Trustees could decide to
value the investments at market value and then unrealized gains and losses would
be included in net investment income above.
NET ASSET VALUE. As described in the prospectus, the Fund values its portfolio
instruments at amortized cost, which does not take into account unrealized
capital gains or losses. This involves initially valuing an instrument at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the effect of fluctuating interest rates on the market
value of the instrument. While this method provides certainty in valuation, it
may result in periods during which value, as determined by amortized cost, is
higher or lower than the price the Fund would receive if it sold the instrument.
Calculations are made to compare the value of the Fund's investments valued at
amortized cost with market-based values. Market-based valuations are obtained by
using actual quotations provided by market makers, estimates of market value, or
values obtained from yield data relating to classes of money market instruments
published by reputable sources at the mean between the bid and asked prices for
the instruments. If a deviation of 1/2 of 1% or more were to occur between the
net asset value per share calculated by reference to market-based values and the
Fund's $1.00 per share net asset value, or if there were any other deviation
that the Board of Trustees of the Fund believed would result in a material
dilution to shareholders or purchasers, the Board of Trustees would promptly
consider what action, if any, should be initiated. If the Fund's net asset value
per share (computed using market-based values) declined, or were expected to
decline, below $1.00 (computed using amortized cost), the Board of Trustees of
the Fund might temporarily reduce or suspend dividend payments in an effort to
maintain the net asset value at $1.00 per share. As a result of such reduction
or suspension of dividends or other action by the Board of Trustees, an investor
would receive less income during a given period than if such a reduction or
suspension had not taken place. Such action could result in investors receiving
no dividend for the period during which they hold their shares and receiving,
upon redemption, a price per share lower than that which they paid. On the other
hand, if the Fund's net asset value per share (computed using market-based
values) were to increase, or were anticipated to increase above $1.00 (computed
using amortized cost), the Board of Trustees of the Fund might supplement
dividends in an effort to maintain the net asset value at $1.00 per share.
TAXES. Interest on indebtedness that is incurred to purchase or carry shares of
a mutual fund which distributes exempt-interest dividends during the year is not
deductible for federal income tax purposes. Further, the Fund may not be an
appropriate investment for persons who are "substantial users" of facilities
financed by industrial development bonds held by the Fund or are "related
persons" to such users; such persons should consult their tax advisers before
investing in the Fund.
The "Superfund Act of 1986" (the "Superfund Act") imposes a separate tax on
corporations at a rate of 0.12 percent of the excess of such corporation's
"modified alternative minimum taxable income" over $2 million. A portion of
tax-exempt interest, including exempt-interest dividends from the Fund, may be
includible in modified alternative minimum taxable income. Corporate
shareholders are advised to consult with their tax advisers with respect to the
consequences of the Superfund Act.
To the extent that dividends are derived from earnings on California state and
local government issues, such dividends will be exempt from California income
taxes provided the Fund has complied with the requirement that at least 50% of
its assets at the close of each quarter in the taxable year be invested in
Municipal Securities of California state and local issuers.
B-9
<PAGE> 29
PERFORMANCE
As reflected in the prospectus, the historical performance calculation for the
Fund may be shown in the form of "yield," "effective yield," and "tax-equivalent
yield." These various measures of performance are described below.
The Fund's yield is computed in accordance with a standardized method prescribed
by rules of the Securities and Exchange Commission. Under that method, the yield
quotation is based on a seven-day period and is computed as follows. The first
calculation is net investment income per share, which is accrued interest on
portfolio securities, plus or minus amortized original issue discount or
premium, less accrued expenses. This number is then divided by the price per
share (expected to remain constant at $1.00) at the beginning of the period
("base period return"). The result is then divided by 7 and multiplied by 365
and the resulting yield figure is carried to the nearest one-hundredth of one
percent. Realized capital gains or losses and unrealized appreciation or
depreciation of investments are not included in the calculation. For the
seven-day period ended September 30, 1995, the Fund's yield was 3.31%.
The Fund's effective yield is determined by taking the base period return
(computed as described above) and calculating the effect of assumed compounding.
The formula for the effective yield is: (base period return +1)365/7 - 1. For
the seven-day period ended September 30, 1995, the Fund's effective yield was
3.37%.
The tax-equivalent yield of the Fund is computed by dividing that portion of
the Fund's yield (computed as described above) which is tax-exempt by (one
minus the stated combined State of California and federal income tax rate) and
adding the result to that portion, if any, of the yield of the Fund that is not
tax- exempt. Based upon an assumed combined State of California and federal
income tax rate of 42.9% and the Fund's yield as computed as described above
for the seven day period ended September 30, 1995, the Fund's tax-equivalent
yield was 5.80%. Based upon an assumed federal income tax rate of 31% and the
Fund's yield computed as described above for the seven-day period ended
September 30, 1995, the Fund's tax-equivalent yield was 4.80%. For additional
information concerning tax-exempt yields, see "Tax-Exempt versus Taxable Yield"
below.
The Fund's yield fluctuates, and the publication of an annualized yield
quotation is not a representation as to what an investment in the Fund will
actually yield for any given future period. Actual yields will depend not only
on changes in interest rates on money market instruments during the period in
which the investment in the Fund is held, but also on such matters as Fund
expenses.
Investors have an extensive choice of money market funds and money market
deposit accounts and the information below may be useful to investors who wish
to compare the past performance of the Fund with that of its competitors. Past
performance is not a guarantee of future results.
As indicated in the prospectus (see "Performance"), the Fund's performance may
be compared to that of other mutual funds tracked by Lipper Analytical Services,
Inc. ("Lipper"). Lipper performance calculations include the reinvestment of all
capital gain and income dividends for the periods covered by the calculations.
The Fund's performance also may be compared to other money market funds as
reported by IBC/Donoghue's Money Fund Report(R) or Money Market Insight(R)
("IBC/Donoghue's"), reporting services on money market funds. As reported by
IBC/Donoghue's, all investment results represent yield (annualized results for
the period net of management fees and other expenses) and one-year investment
results are effective annual yields assuming reinvestment of dividends.
The following investment comparisons are based upon information reported by
Lipper and IBC/Donoghue's. In the comparison of the Fund's performance versus
IBC/Donoghue's average yield for All Taxable Money Market Funds and Lipper
performance of Money Market Instrument Funds, the performance of the Fund has
been adjusted on a taxable equivalent basis assuming a combined California and
federal tax rate of 42.9% (see "Tax-Exempt versus Taxable Yield" below for more
information concerning taxable equivalent performance).
B-10
<PAGE> 30
IBC/DONOGHUE'S LIPPER ANALYTICAL SERVICES, INC.
<TABLE>
<CAPTION>
IBC/DONOGHUE'S
AVERAGE LIPPER
YIELD CALIFORNIA
TAX-EXEMPT ALL TAX-EXEMPT TAX-EXEMPT
CALIFORNIA TAX-FREE CALIFORNIA MONEY
MONEY MONEY MONEY MARKET
MARKET MARKET MARKET FUNDS
PERIOD FUND FUNDS PERIOD FUND AVERAGE
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------- -----------------------------------------------------
7 Days Ended 9/25/95 3.30 % 3.41 % 1 Month Ended 9/30/95 0.26 % 0.26 %
1 Month Ended 9/30/95 3.17 3.28 11 Months Ended 9/30/95 3.01 2.98
1 Year Ended 9/30/95 3.23 3.30 1 Year Ended 9/30/95 3.23 3.23
</TABLE>
<TABLE>
<CAPTION>
TAX-EXEMPT IBC/DONOGHUE'S TAX-EXEMPT
CALIFORNIA AVERAGE CALIFORNIA
MONEY YIELD MONEY LIPPER
MARKET ALL MARKET MONEY
FUND TAXABLE FUND MARKET
TAXABLE MONEY TAXABLE INSTRUMENT
EQUIVALENT MARKET EQUIVALENT FUNDS
PERIOD BASIS* FUNDS PERIOD BASIS* AVERAGE
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------- ----------------------------------------------------
7 Days Ended 9/25/95 5.78 % 5.21 %** 1 Month Ended 9/30/95 0.46 % 0.42 %
1 Month Ended 9/30/95 5.55 5.25 11 Months Ended 9/30/95 5.27 4.87
1 Year Ended 9/30/95 5.66 5.34 1 Year Ended 9/30/95 5.66 5.27
</TABLE>
- --------------------------------------------------------------------------------
* Source: Kemper Financial Services, Inc. (not reported in IBC/Donoghue's or
Lipper).
** As of 9/26/95
The Fund's performance also may be compared on an after-tax basis to various
bank products, including the average rate of bank and thrift institution money
market deposit accounts or interest bearing checking accounts as reported in the
BANK RATE MONITOR National Index(TM) of 100 leading bank and thrift institutions
as published by the BANK RATE MONITOR(TM), N. Palm Beach, Florida 33408. The
rates published by the BANK RATE MONITOR National Index(TM) are averages of the
personal account rates offered on the Wednesday prior to the date of publication
by 100 large banks and thrifts in the top ten Consolidated Standard Metropolitan
Statistical Areas. Account minimums range upward from $2,500 in each institution
and compounding methods vary. Interest bearing checking accounts generally offer
unlimited check writing while money market deposit accounts generally restrict
the number of checks that may be written. If more than one rate is offered, the
lowest rate is used. Rates are determined by the financial institution and are
subject to change at any time specified by the institution. Bank products
represent a taxable alternative income producing product. Bank and thrift
institution deposit accounts may be insured. Shareholder accounts in the Fund
are not insured. Bank passbook savings accounts share some liquidity features
with money market mutual fund accounts but they may not offer all the features
available from a money market mutual fund, such as check writing. Bank passbook
savings accounts normally offer a fixed rate of interest while the yield of the
Fund fluctuates. Bank checking accounts normally do not pay interest but share
some liquidity features with money market mutual fund accounts (e.g., the
ability to write checks against the account). Bank certificates of deposit may
offer fixed or variable rates for a set term. (Normally, a variety of terms are
available.) Withdrawal of these deposits prior to maturity normally will be
subject to a penalty. In contrast, shares of the Fund are redeemable at the net
asset value (normally $1.00 per share) next determined after a request is
received, without charge.
Investors also may want to compare the Fund's performance on an after-tax basis
to that of U.S. Treasury bills or notes because such instruments represent
alternative income producing products. Treasury obligations are issued in
selected denominations. Rates of U.S. Treasury obligations are fixed at the time
of issuance and payment of principal and interest is backed by the full faith
and credit of the U.S. Treasury. The market value of such instruments generally
will fluctuate inversely with interest rates prior to maturity and will equal
par value at maturity. Generally, the value of obligations with shorter
maturities will fluctuate less than those with longer maturities. The Fund's
yield will fluctuate. Also, while the Fund seeks to maintain a net asset value
per share of $1.00, there is no assurance that it will be able to do so.
B-11
<PAGE> 31
Any such comparisons may be useful to investors who wish to compare the Fund's
past performance with that of its competitors. Of course, past performance
cannot be a guarantee of future results.
The Fund's performance also may be compared to the Consumer Price Index, as
published by the U.S. Bureau of Labor Statistics, which is an established
measure of change over time in the prices of goods and services in major
expenditure groups.
TAX-EXEMPT VERSUS TAXABLE YIELD. You may want to determine which
investment--tax-exempt or taxable--will provide you with a higher after-tax
return. To determine the taxable equivalent yield, simply divide the yield from
the tax-exempt investment by [1 minus your marginal tax rate]. The tables below
are provided for your convenience in making this calculation for selected
tax-exempt yields and taxable income levels. These yields are presented for
purposes of illustration only and are not representative of any yield that the
Fund may generate. Both tables are based upon the 1996 federal and 1995 state
tax rates and brackets.
TAXABLE EQUIVALENT YIELD TABLE FOR PERSONS WHOSE ADJUSTED GROSS INCOME IS UNDER
$117,950
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME YOUR
MARGINAL A TAX-EXEMPT YIELD OF:
FEDERAL TAX 2% 3% 4% 5% 6% 7%
SINGLE JOINT RATE IS EQUIVALENT TO A TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
$24,000 - $58,150 $40,100 - $96,900 28.0% 2.78 4.17 5.56 6.94 8.33 9.72
- ------------------------------------------------------------------------------------------------------------------------
Over $58,150 Over $96,900 31.0 2.90 4.35 5.80 7.25 8.70 10.14
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME COMBINED
CALIFORNIA
AND A TAX-EXEMPT YIELD OF:
FEDERAL TAX 2% 3% 4% 5% 6% 7%
SINGLE JOINT RATE IS EQUIVALENT TO A TAXABLE YIELD OF:
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$24,000 - $25,083 $40,100 - $50,166 32.3% 2.95 4.43 5.91 7.39 8.86 10.34
- ----------------------------------------------------------------------------------------------------------------------
$25,083 - $31,700 $50,166 - $63,400 33.8 3.02 4.53 6.04 7.55 9.06 10.57
- ----------------------------------------------------------------------------------------------------------------------
$31,700 - $58,150 $63,400 - $96,900 34.7 3.06 4.59 6.13 7.66 9.19 10.72
- ----------------------------------------------------------------------------------------------------------------------
Over $58,150 Over $96,900 37.4 3.19 4.79 6.39 7.99 9.58 11.18
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
TAXABLE EQUIVALENT YIELD TABLE FOR PERSONS WHOSE ADJUSTED GROSS INCOME IS OVER
$117,950*
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME YOUR
MARGINAL A TAX-EXEMPT YIELD OF:
FEDERAL TAX 2% 3% 4% 5% 6% 7%
SINGLE JOINT RATE IS EQUIVALENT TO A TAXABLE YIELD OF:
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$ 58,150 - $121,300 $ 96,900 - $147,700 31.9% 2.94 4.41 5.87 7.34 8.81 10.28
- ------------------------------------------------------------------------------------------------------------------------
$121,300 - $263,750 $147,700 - $263,750 37.1 3.18 4.77 6.36 7.95 9.54 11.13
- ------------------------------------------------------------------------------------------------------------------------
Over $263,750 Over $263,750 40.8 3.38 5.07 6.76 8.45 10.14 11.82
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
B-12
<PAGE> 32
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
TAXABLE INCOME COMBINED
CALIFORNIA
AND A TAX-EXEMPT YIELD OF:
FEDERAL TAX 2% 3% 4% 5% 6% 7%
SINGLE JOINT RATE IS EQUIVALENT TO A TAXABLE YIELD OF:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
$ 58,150 - $109,936 $ 96,900 - $147,700 38.2% 3.24 4.85 6.47 8.09 9.71 11.33
- ------------------------------------------------------------------------------------------------------------------------
$109,936 - $121,300 38.7 3.26 4.89 6.53 8.16 9.79 11.42
- ------------------------------------------------------------------------------------------------------------------------
$147,700 - $219,872 42.9 3.50 5.25 7.01 8.76 10.51 12.26
- ------------------------------------------------------------------------------------------------------------------------
$121,300 - $219,872 $219,872 - $263,750 43.4 3.53 5.30 7.07 8.83 10.60 12.37
- ------------------------------------------------------------------------------------------------------------------------
$219,872 - $263,750 44.0 3.57 5.36 7.14 8.93 10.71 12.50
- ------------------------------------------------------------------------------------------------------------------------
$263,750 - $439,744 46.7 3.75 5.63 7.50 9.38 11.26 13.13
- ------------------------------------------------------------------------------------------------------------------------
Over $263,750 Over $439,744 47.3 3.80 5.69 7.59 9.49 11.39 13.28
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This table assumes a decrease of $3.00 of itemized deductions for each $100
of adjusted gross income over $117,950. For a married couple with adjusted
gross income between $176,950 and $299,450 (single between $117,950 and
$240,450), add 0.7% to the above Marginal Federal Tax Rate for each personal
and dependency exemption. The taxable equivalent yield is the tax-exempt
yield divided by: 100% minus the adjusted tax rate. For example, if the table
tax rate is 37.1% and you are married with no dependents, the adjusted tax
rate is 38.5% (37.1% + 0.7% + 0.7%). For a tax-exempt yield of 6%, the
taxable equivalent yield is about 9.8% (6% / (100% - 38.5%)).
OFFICERS AND TRUSTEES
The officers and trustees of the Fund, their birthdates, their principal
occupations and their affiliations, if any, with KFS, the investment manager and
KDI, the principal underwriter, are as follows: (The number following each
person's title is the number of investment companies managed by KFS or an
affiliate, for which he or she holds similar positions):
DAVID W. BELIN (6/20/28), Trustee, (22), 2000 Financial Center, 7th and Walnut,
Des Moines, Iowa; Member, Belin Harris Lamson McCormick, P.C. (attorneys).
LEWIS A. BURNHAM (1/8/33) Trustee, (22), 16410 Avila Boulevard, Tampa, Florida;
Director, Management Consulting Services, McNulty & Company; formerly, Executive
Vice President, Anchor Glass Container Corporation.
DONALD L. DUNAWAY (3/8/37), Trustee, (22), 7515 Pelican Bay Boulevard, Naples,
Florida; Retired; formerly, Executive Vice President, A. O. Smith Corporation
(diversified manufacturer).
ROBERT B. HOFFMAN (12/11/36), Trustee, (22), 800 North Lindbergh Boulevard, St.
Louis, Missouri; Senior Vice President and Chief Financial Officer, Monsanto
Company (chemical products); prior thereto, Vice President, FMC Corporation
(manufacturer of machinery and chemicals); prior thereto, Director, Executive
Vice President and Chief Financial Officer, Staley Continental, Inc. (food
products).
DONALD R. JONES (1/17/30), Trustee, (22), 1303 East Algonquin Road, Schaumburg,
Illinois; Retired; Director, Motorola, Inc. (manufacturer of electronic
equipment and components); formerly, Executive Vice President and Chief
Financial Officer, Motorola, Inc.
SHIRLEY D. PETERSON (9/3/41), Trustee (22), 401 Rosemont Avenue, Frederick,
Maryland; President, Hood College, Maryland; prior thereto, Partner, Steptoe &
Johnson (attorneys); prior thereto, Commissioner of Internal Revenue Service;
prior thereto, Assistant Attorney General, U.S. Department of Treasury.
WILLIAM P. SOMMERS (7/22/33), Trustee, (22), 333 Ravenswood Avenue, Menlo Park,
California; President and Chief Executive Officer, SRI International (research
and development); prior thereto, Executive Vice President, Iameter (medical
information and educational service provider); prior thereto, Senior Vice
President and Director,
B-13
<PAGE> 33
Booz, Allen & Hamilton, Inc. (management consulting firm) (retired); Director,
Rohr, Inc., Therapeutic Discovery Corp. and Litton Industries.
STEPHEN B. TIMBERS (8/8/44), President and Trustee*, (34), 120 South LaSalle
Street, Chicago, Illinois; President, Chief Executive Officer, Chief Investment
Officer and Director, KFS; Director, KDI, DVA and LTV Corporation.
JOHN E. NEAL (3/9/50), Vice President*, (34), 120 South LaSalle Street, Chicago,
Illinois; Chief Operating Officer and Director, KFS; Director, DVA and KDI.
JOHN E. PETERS (11/4/47), Vice President*, (34), 120 South LaSalle Street,
Chicago, Illinois; Senior Executive Vice President, KFS; President and Director,
KDI and Director, DVA.
J. PATRICK BEIMFORD, JR. (5/25/50), Vice President*, (23), 120 South LaSalle
Street, Chicago, Illinois; Chief Investment Officer -- Fixed Income Investments
and Executive Vice President, KFS.
FRANK J. RACHWALSKI, JR. (3/26/45), Vice President*, (8), 120 South LaSalle
Street, Chicago, Illinois; Senior Vice President, KFS.
JEROME L. DUFFY (6/29/36), Treasurer*, (34), 120 South LaSalle Street, Chicago,
Illinois; Senior Vice President, KFS.
PHILIP J. COLLORA (11/15/45), Vice President and Secretary*, (34), 120 South
LaSalle Street, Chicago, Illinois; Attorney, Senior Vice President and Assistant
Secretary, KFS.
CHARLES F. CUSTER (8/19/28), Vice President and Assistant Secretary*, (34), 222
North LaSalle Street, Chicago, Illinois; Partner, Vedder, Price, Kaufman &
Kammholz (attorneys), Legal Counsel to the Fund.
ELIZABETH C. WERTH (10/1/47), Assistant Secretary*, (26), 120 South LaSalle
Street, Chicago, Illinois; Vice President, KFS; and Vice President and Director
of State Registrations, KDI.
* Interested persons as defined in the Investment Company Act of 1940.
The trustees and officers who are "interested persons" as designated above
receive no compensation from the Fund, except that Mr. Custer's law firm
receives fees from the Fund as counsel to the Fund. The table below shows
amounts paid or accrued to those trustees who are not designated "interested
persons" during the Fund's 1995 fiscal year except that the information in the
last column is for calendar year 1995.
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT BENEFITS TOTAL COMPENSATION
COMPENSATION ACCRUED AS PART OF FROM KEMPER FUNDS
NAME OF TRUSTEE FROM FUND FUND EXPENSES PAID TO TRUSTEES**
- ---------------------------------------- ------------ ------------------- -------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
David W. Belin*......................... $2,200 $ 0 $ 149,700
Lewis A. Burnham........................ $1,800 $ 0 $ 111,000
Donald L. Dunaway*...................... $2,400 $ 0 $ 151,000
Robert B. Hoffman....................... $1,600 $ 0 $ 105,500
Donald R. Jones......................... $1,600 $ 0 $ 110,700
Shirley D. Peterson***.................. $ 500 $ 0 $ 44,500
William P. Sommers...................... $1,500 $ 0 $ 100,700
</TABLE>
* Includes current fees and interest deferred pursuant to deferred compensation
agreements with the Fund. Deferred amounts accrue interest monthly at a rate
equal to the yield of Kemper Money Market Fund -- Money Market Portfolio.
Total deferred fees and interest accrued for latest and prior fiscal years
for this Fund are $14,000 for Mr. Belin and $15,700 for Mr. Dunaway.
** Includes compensation for services as trustee on twenty-four fund boards for
calendar year 1995. Also includes estimated amounts for new funds that
assume the fund existed at the beginning of the year except for Kemper
Value+Growth Fund since trustee fee schedule not available.
*** Elected trustee on September 19, 1995.
As of January 5, 1996, the trustees and officers as a group owned less than 1%
of the then outstanding shares of the Fund and no person owned of record 5% or
more of the outstanding shares of the Fund, except that Everen Clearing
Corporation, 111 Kilbourn Avenue, Milwaukee, Wisconsin 53203, owned of record
80.17% of the Fund's shares.
B-14
<PAGE> 34
SPECIAL FEATURES
EXCHANGE PRIVILEGE. Subject to the limitations described below, Class A shares
(or the equivalent) of the following Kemper Mutual Funds may be exchanged for
each other at their relative net asset values: Kemper Technology Fund, Kemper
Total Return Fund, Kemper Growth Fund, Kemper Small Capitalization Equity Fund,
Kemper Income and Capital Preservation Fund, Kemper Municipal Bond Fund, Kemper
Diversified Income Fund, Kemper High Yield Fund, Kemper U.S. Government
Securities Fund, Kemper International Fund, Kemper State Tax-Free Income Series,
Kemper Adjustable Rate U.S. Government Fund, Kemper Blue Chip Fund, Kemper
Global Income Fund, Kemper Target Equity Fund (series are subject to a limited
offering period), Kemper Intermediate Municipal Bond Fund, Kemper Cash Reserves
Fund, Kemper U.S. Mortgage Fund, Kemper Short-Intermediate Government Fund
Kemper-Dreman Fund, Inc., Kemper Value+Growth Fund and Kemper Horizon Fund
("Kemper Mutual Funds") and certain "Money Market Funds" (Kemper Money Market
Fund, Cash Equivalent Fund, Tax-Exempt California Money Market Fund, Cash
Account Trust, Tax-Exempt New York Money Market Fund and Investors Cash Trust).
Shares of Money Market Funds and Kemper Cash Reserves Fund that were acquired by
purchase (not including shares acquired by dividend reinvestment) are subject to
the applicable sales charge on exchange. Shares purchased by check or through an
ACH transaction may not be exchanged until they have been owned for at least 15
days. In addition, shares of Kemper Mutual Funds (except Kemper Cash Reserves
Fund), acquired by exchange from another Fund may not be exchanged thereafter
until they have been owned for 15 days. Series of Kemper Target Equity Fund are
available on exchange only during the Offering Period for such series as
described in the prospectus for such series. Cash Equivalent Fund, Tax-Exempt
California Money Market Fund, Cash Account Trust, Tax-Exempt New York Money
Market Fund and Investors Cash Trust are available on exchange but only through
a financial services firm having a services agreement with KDI with respect to
such Funds. Exchanges may only be made for funds that are available for sale in
the shareholder's state of residence. Currently, Tax-Exempt California Money
Market Fund is available for sale only in California and Tax-Exempt New York
Money Market Fund is available for sale only in New York, Connecticut, New
Jersey and Pennsylvania.
The total value of shares being exchanged must at least equal the minimum
investment requirement of the fund into which they are being exchanged.
Exchanges are made based on relative dollar values of the shares involved in the
exchange. There is no service fee for an exchange; however, financial services
firms may charge for their services in expediting exchange transactions.
Exchanges will be effected by redemption of shares of the fund held and purchase
of shares of the other fund. For federal income tax purposes, any such exchange
constitutes a sale upon which a gain or loss may be realized, depending upon
whether the value of the shares being exchanged is more or less than the
shareholder's adjusted cost basis. Shareholders interested in exercising the
exchange privilege may obtain an exchange form and prospectuses of the other
funds from firms or KDI. Exchanges also may be authorized by telephone if the
account holder has given authorization. Once the authorization is on file, the
Shareholder Service Agent will honor requests by telephone at 1-800-231-8568,
subject to the limitations on liability described under "Redemption of Shares"
in the prospectus. Any share certificates must be deposited prior to any
exchange of such shares. During periods when it is difficult to contact the
Shareholder Service Agent by telephone, it may be difficult to use the telephone
exchange privilege. The exchange privilege is not a right and may be suspended,
terminated or modified at any time. Except as otherwise permitted by applicable
regulation, 60 days' prior written notice of any termination or material change
will be provided.
SYSTEMATIC EXCHANGE PRIVILEGE. The owner of $1,000 or more of the shares of a
Kemper Mutual Fund or Money Market Fund may authorize the automatic exchange of
a specified amount ($100 minimum) of such shares for shares of another such
Kemper Fund. Shareholders interested in the systematic exchange privilege may
obtain the appropriate forms and prospectuses of the other funds from firms or
the Shareholder Service Agent. If selected, exchanges will be made automatically
until the privilege is terminated by the shareholder or the other Kemper Fund.
Exchanges are subject to the terms and conditions described above under
"Exchange Privilege", including the $1,000 minimum investment requirement for
the Kemper Fund acquired on exchange. This privilege may not be used for the
exchange of shares held in certificated form.
B-15
<PAGE> 35
SYSTEMATIC WITHDRAWAL PROGRAM. The owner of $5,000 or more of the Fund's shares
may provide for the payment from the owner's account of any requested dollar
amount to be paid to the owner or a designated payee monthly, quarterly,
semi-annually or annually. The minimum periodic payment is $100. Shares are
redeemed so that the payee will receive payment approximately the first of the
month. Dividend distributions will be automatically reinvested at net asset
value. A sufficient number of full and fractional shares will be redeemed to
make the designated payment. Depending upon the size of the payments requested,
redemptions for the purpose of making such payments may reduce or even exhaust
the account. The right is reserved to amend the systematic withdrawal program on
thirty days notice. The program may be terminated at any time by the shareholder
or the Fund. Firms provide varying arrangements for their clients to redeem Fund
shares on a periodic basis. Such firms may independently establish minimums for
such services.
ELECTRONIC FUNDS TRANSFER PROGRAMS. For your convenience, the Fund has
established several investment and redemption programs using electronic funds
transfer via the Automated Clearing House (ACH). There is currently no charge by
the Fund for these ACH transactions. To use these features, your financial
institution must be affiliated with an Automated Clearing House (ACH). This ACH
affiliation permits the Shareholder Service Agent to rely upon telephone
instructions from ANY PERSON to electronically transfer money between your bank
account, or employer's payroll bank in the case of Direct Deposit, and your Fund
account, subject to the limitations on liability under "Redemption of Shares" in
the prospectus. Your bank's crediting policies of these transferred funds may
vary. These features may be amended or terminated at any time by the Fund.
Shareholders should contact the Shareholder Service Agent at 1-800-231-8568 or
the firm through which their account was established for more information. These
programs may not be available through some firms that distribute shares of the
Fund.
SHAREHOLDER RIGHTS
The Fund generally is not required to hold meetings of its shareholders. Under
the Agreement and Declaration of Trust of the Fund ("Declaration of Trust"),
however, shareholder meetings will be held in connection with the following
matters: (a) the election or removal of trustees if a meeting is called for such
purpose; (b) the adoption of any contract for which shareholder approval is
required by the Investment Company Act of 1940 ("1940 Act"); (c) any termination
of the Fund to the extent and as provided in the Declaration of Trust; (d) any
amendment of the Declaration of Trust (other than amendments changing the name
of the Fund or any Portfolio, establishing a Portfolio, supplying any omission,
curing any ambiguity or curing, correcting or supplementing any defective or
inconsistent provision thereof); (e) as to whether a court action, proceeding or
claim should or should not be brought or maintained derivatively or as a class
action on behalf of the Fund or the shareholders, to the same extent as the
stockholders of a Massachusetts business corporation; and (f) such additional
matters as may be required by law, the Declaration of Trust, the By-laws of the
Fund, or any registration of the Fund with the Securities and Exchange
Commission or any state, or as the trustees may consider necessary or desirable.
The shareholders also would vote upon changes in fundamental investment
objectives, policies or restrictions.
Each trustee serves until the next meeting of shareholders, if any, called for
the purpose of electing trustees and until the election and qualification of a
successor or until such trustee sooner dies, resigns, retires or is removed by a
majority vote of the shares entitled to vote (as described below) or a majority
of the trustees. In accordance with the 1940 Act (a) the Fund will hold a
shareholder meeting for the election of trustees at such time as less than a
majority of the trustees have been elected by shareholders, and (b) if, as a
result of a vacancy on the Board of Trustees, less than two-thirds of the
trustees have been elected by the shareholders, that vacancy will be filled only
by a vote of the shareholders.
Trustees may be removed from office by a vote of the holders of a majority of
the outstanding shares at a meeting called for that purpose, which meeting shall
be held upon the written request of the holders of not less than 10% of the
outstanding shares. Upon the written request of ten or more shareholders who
have been such for at least six months and who hold shares constituting at least
1% of the outstanding shares of the Fund stating that such shareholders wish to
communicate with the other shareholders for the purpose of obtaining the
signatures necessary
B-16
<PAGE> 36
to demand a meeting to consider removal of a trustee, the Fund has undertaken to
disseminate appropriate materials at the expense of the requesting shareholders.
The Declaration of Trust provides that the presence at a shareholder meeting in
person or by proxy of at least 30% of the shares entitled to vote on a matter
shall constitute a quorum. Thus, a meeting of shareholders of the Fund could
take place even if less than a majority of the shareholders were represented on
its scheduled date. Shareholders would in such a case be permitted to take
action which does not require a larger vote than a majority of a quorum, such as
the election of trustees and ratification of the selection of auditors. Some
matters requiring a larger vote under the Declaration of Trust, such as
termination or reorganization of the Fund and certain amendments of the
Declaration of Trust, would not be affected by this provision; nor would matters
which under the 1940 Act require the vote of a "majority of the outstanding
voting securities" as defined in the 1940 Act.
The Declaration of Trust specifically authorizes the Board of Trustees to
terminate the Fund (or any Portfolio) by notice to the shareholders without
shareholder approval.
Under Massachusetts law, shareholders of a Massachusetts business trust could,
under certain circumstances, be held personally liable for obligations of the
Fund. The Declaration of Trust, however, disclaims shareholder liability for
acts or obligations of the Fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed by
the Fund or the trustees. Moreover, the Declaration of Trust provides for
indemnification out of Fund property for all losses and expenses of any
shareholder held personally liable for the obligations of the Fund and the Fund
will be covered by insurance which the trustees consider adequate to cover
foreseeable tort claims. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is considered by KFS remote and not
material, since it is limited to circumstances in which a disclaimer is
inoperative and the Fund itself is unable to meet its obligations.
B-17
<PAGE> 37
APPENDIX--RATINGS OF INVESTMENTS
The two highest ratings of Moody's Investors Service, Inc. ("Moody's") for
Municipal Securities are Aaa and Aa. Municipal Securities rated Aaa are judged
to be of the "best quality." The rating of Aa is assigned to Municipal
Securities which are of "high quality by all standards," but as to which margins
of protection or other elements make long-term risks appear somewhat larger than
Aaa rated Municipal Securities. The Aaa and Aa rated Municipal Securities
comprise what are generally known as "high grade."
The two highest ratings of Standard & Poor's Corporation ("S&P") for Municipal
Securities are AAA (Prime) and AA (High Grade). Municipal Securities rated AAA
are "obligations of the highest quality." The rating of AA is accorded issues
with investment characteristics "only slightly less marked than those of the
prime quality issues."
Moody's ratings for state and municipal notes and other short-term loans will be
designated Moody's Investment Grade (MIG). This distinction is in recognition of
the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in
short-term borrowing, while various factors of the first importance in bond risk
are of lesser importance in the short run. Loans designated MIG-1 are of the
best quality, enjoying strong protection from established cash flows of funds
for their servicing or from established and broad-based access to the market for
refinancing, or both. Loans designated MIG-2 are of high quality, with margins
of protection ample although not so large as in the preceding group.
An S&P municipal and corporate commercial paper rating is a current assessment
of the likelihood of timely payment of debt having an original maturity of no
more than 365 days. Ratings are graded into four categories, ranging from "A"
for the highest quality obligations to "D" for the lowest. Issues assigned this
highest rating are regarded as having the greatest capacity for timely payment.
The designation A-1 indicates that the degree of safety regarding timely payment
is very strong. The designation A-2 indicates the capacity for timely payment is
strong. However, the relative degree of safety is not as overwhelming as for
issues designated "A-1."
The "other debt securities" included in the definition of temporary investments
are corporate (as opposed to municipal) debt obligations rated AAA or AA by S&P
or Aaa or Aa by Moody's. Corporate debt obligations rated AAA by S&P are
"highest grade obligations." Obligations bearing the rating of AA also qualify
as "high grade obligations" and "in the majority of instances differ from AAA
issues only in small degree." The Moody's corporate debt ratings of Aaa and Aa
do not differ materially from those set forth above for Municipal Securities.
The ratings Prime-1 and Prime-2 are the two highest commercial paper ratings
assigned by Moody's. Among the factors considered by them in assigning ratings
are the following: (a) evaluation of the management of the issuer; (b) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (c) evaluation of
the issuer's products in relation to competition and customer acceptance; (d)
liquidity; (e) amount and quality of long-term debt; (f) trend of earnings over
a period of ten years; (g) financial strength of a parent company and the
relationships which exist with the issuer; and (h) recognition by the management
of obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Relative strength or
weakness of the above factors determines whether the issuer's commercial paper
is rated Prime-1, 2 or 3.
After its purchase by the Fund, an issue of Municipal Securities or a temporary
investment may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. Neither event requires the elimination of
such obligation from the Fund's portfolio, but the Fund's investment adviser
will consider such an event in its determination of whether the Fund should
continue to hold such obligation in its portfolio. To the extent that the
ratings accorded by S&P or Moody's for Municipal Securities or temporary
investments may change as a result of changes in such organizations, or changes
in their rating systems, the Fund will attempt to use comparable ratings as
standards for its investments in Municipal Securities or temporary investments
in accordance with the investment policies contained herein.
B-18
<PAGE> 38
1
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
We are pleased to provide you with the Tax-Exempt California Money
Market Fund annual report for the year ended
September 30, 1995.
Your Fund's management greatly appreciates your decision to invest in Tax-Exempt
California Money Market Fund. During the past year, the fund registered solid
performance and achieved its objective of providing maximum current income that
is exempt from federal and State of California income taxes while maintaining
stability of principal.
ECONOMIC REVIEW AND OUTLOOK
The momentum of the 1994 economic expansion has continued on into 1995, as
evidenced by growth in personal income, consumer spending, construction spending
and hiring during the year ended September 30, 1995.
It was over a year ago that the Federal Reserve Board initiated a series of rate
hikes intended to slow economic growth and keep inflation in check. While other
markets reacted negatively to the rising rate environment, it had a positive
effect on the short-term money markets. Tax-Exempt California Money Market Fund
took advantage of rising interest rates by investing in high quality, short-term
money market instruments which are exempt from federal and State of California
income taxes.
Looking ahead, we anticipate the economy will grow at a moderate pace with some
signs of acceleration. Inflation should not become a problem, and we anticipate
an extended period of interest rate stability. While investments in other
markets may remain volatile, money market funds such as Tax-Exempt California
Money Market Fund should offer the opportunity for attractive yields and should
continue to be an excellent place to invest your money.
Your Fund's management thanks you for the vote of confidence you have shown
through your investment and continues its dedication to performance.
We look forward to serving your investment needs for years to come.
Sincerely,
Frank J. Rachwalski
Frank J. Rachwalski
Vice President and Portfolio Manager
October 12, 1995
Frank Rachwalski is Senior Vice President of Kemper Financial Services, Inc. and
Vice President and Portfolio Manager of Tax-Exempt California Money Market Fund.
Mr. Rachwalski holds a B.B.A. and a M.B.A. degree from Loyola University.
PORTFOLIO RESULTS
For the year ended September 30, 1995, the Tax-Exempt California Money Market
Fund had a net annualized yield of 3.18% and a tax-equivalent yield of 5.57%.*
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
STATISTICAL NOTE
The Fund's net annualized yield for the year ended September 30, 1995, is the
annualized sum of the daily dividend rates for the period. Yields are historical
and may not represent future yields, which will fluctuate.
*The tax-equivalent yield is based upon the Fund's yield and a 42.9% combined
Federal and State of California marginal income tax rate. Income from the
Tax-Exempt California Money Market Fund may be subject to local taxes.
<PAGE> 39
2
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
(Value in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
<S> <C>
(A)VARIABLE RATE DEMAND SECURITIES
Anaheim
Police Facilities Refinancing Project
4.00% $ 1,800
- ----------------------------------------------------------
Auburn
Union School District
4.50% 3,625
- ----------------------------------------------------------
Chula Vista
Multifamily Housing Refunding Revenue
4.30% 1,300
- ----------------------------------------------------------
Costa Mesa
Performing Arts Center
4.35% 3,955
- ----------------------------------------------------------
Eastern Municipal Water District
Water and Sewer Revenue
4.20% 4,000
- ----------------------------------------------------------
Fremont
Fire Stations Financing Project
4.35% 3,800
- ----------------------------------------------------------
Health Facilities Financing Authority
Catholic Healthcare West
4.15% 4,000
Pooled Loan Program
4.10% 1,010
Scripps Memorial Hospitals
4.10% 1,480
- ----------------------------------------------------------
Irvine
East Investment Company Revenue
4.20% 1,810
Public Facilities and Infrastructure Authority
4.40% 3,600
Ranch Water District
4.80% 2,100
- ----------------------------------------------------------
Kern County
Community College District
4.50% 4,500
- ----------------------------------------------------------
Lancaster
Redevelopment Agency
4.40% 2,000
- ----------------------------------------------------------
Midway
School District
4.20% 1,660
- ----------------------------------------------------------
<CAPTION>
Value
<S> <C>
Monterey County
Peninsula Water Management District
4.05% $ 4,500
Regional Waste Management Authority
4.35% 2,000
- ----------------------------------------------------------
Palm Springs
Community Redevelopment Agency
4.00% 4,630
- ----------------------------------------------------------
Pollution Control Financing Authority
3.70% 2,500
- ----------------------------------------------------------
Riverside County
Industrial Development Authority
4.20% 1,300
- ----------------------------------------------------------
Roseville
Finance Authority
4.20% 1,950
- ----------------------------------------------------------
Sacramento County
Multifamily Housing Revenue
Briarwood Apartments
4.35% 2,800
River Oaks Apartments
4.35% 1,500
Stone Creek Apartments
4.40% 4,700
- ----------------------------------------------------------
San Bernardino
Multifamily Housing Revenue
4.60% 1,500
- ----------------------------------------------------------
San Diego
Housing Authority
La Cima Apartments
4.25% 1,000
Lusk Mira Mesa Apartments
3.75% 3,300
Paseo Point Apartments
4.00% 2,600
- ----------------------------------------------------------
Santa Ana
School District
4.45% 3,000
- ----------------------------------------------------------
Ventura County
Triunfo Sanitation District
4.30% 2,500
- ----------------------------------------------------------
TOTAL VARIABLE RATE DEMAND
SECURITIES--76.4%
(average maturity: 5 days) 80,420
- ----------------------------------------------------------
</TABLE>
<PAGE> 40
3
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
<S> <C>
OTHER SECURITIES
California
Health Facilities Financing Authority
3.50%, 2/1/96 $ 980
Pollution Control Financing Authority
3.70%-3.80%, 11/7/95-11/14/95 11,000
Public Capital Improvements Financing Authority
3.80%, 12/15/95 4,500
- ----------------------------------------------------------
Los Angeles County
Transportation Commission
3.60%-3.65%, 11/14/95-12/15/95 4,235
- ----------------------------------------------------------
Orange County
Municipal Water District
3.95%, 10/23/95 3,000
- ----------------------------------------------------------
<CAPTION>
Value
<S> <C>
TOTAL OTHER SECURITIES--22.5%
(average maturity: 53 days) $ 23,715
- ----------------------------------------------------------
TOTAL INVESTMENTS--98.9%
(average maturity: 16 days) 104,135
- ----------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--1.1% 1,157
- ----------------------------------------------------------
NET ASSETS--100% $ 105,292
- ----------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
Interest rates represent annualized yield to date of maturity, except for
variable rate demand securities described in Note (a). For each security, cost
(for financial reporting and federal income tax purposes) and carrying value are
the same. Likewise, carrying value approximates principal amount.
(a) Variable rate demand securities are payable within five business days and
are backed by credit support agreements from banks or insurance
institutions. The rates shown are the current rates at September 30, 1995.
See accompanying Notes to Financial Statements.
<PAGE> 41
4
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Tax-Exempt California Money Market Fund as of
September 30, 1995, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the fiscal periods since 1991.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Tax-Exempt California Money Market Fund at September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the fiscal periods since 1991, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 14, 1995
<PAGE> 42
5
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
- ----------------------------------------------------------
Investments, at amortized cost $ 104,135
- ----------------------------------------------------------
Cash 1,013
- ----------------------------------------------------------
Receivable for:
Interest 396
- ----------------------------------------------------------
Securities sold 80
- ----------------------------------------------------------
Shares of the Fund sold 10
- ----------------------------------------------------------
Total assets 105,634
- ----------------------------------------------------------
LIABILITIES AND NET ASSETS
- ----------------------------------------------------------
Payable for:
Dividends 145
- ----------------------------------------------------------
Shares of the Fund redeemed 54
- ----------------------------------------------------------
Management fee 20
- ----------------------------------------------------------
Distribution fee 29
- ----------------------------------------------------------
Custodian and transfer agent fees
and related expenses 17
- ----------------------------------------------------------
Other 77
- ----------------------------------------------------------
Total liabilities 342
- ----------------------------------------------------------
Net assets applicable to
shares outstanding $ 105,292
==========================================================
THE PRICING OF SHARES
- ----------------------------------------------------------
Shares outstanding, no par value 105,292
- ----------------------------------------------------------
Net asset value and
redemption price per share $1.00
==========================================================
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year ended September 30, 1995
(in thousands)
- ----------------------------------------------------------
<TABLE>
<S> <C>
INTEREST INCOME $3,851
- ----------------------------------------------------------
EXPENSES:
Management fee 217
- ----------------------------------------------------------
Distribution fee 325
- ----------------------------------------------------------
Custodian and transfer agent
fees and related expenses 108
- ----------------------------------------------------------
Professional fees 34
- ----------------------------------------------------------
Reports to shareholders 16
- ----------------------------------------------------------
Registration costs 3
- ----------------------------------------------------------
Trustees' fees and other 33
- ----------------------------------------------------------
Total expenses 736
- ----------------------------------------------------------
Net investment income $3,115
==========================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1995 and 1994
(in thousands)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,115 2,180
- ----------------------------------------------------------
Dividends to shareholders from
net investment income (3,115) (2,180)
- ----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (DOLLAR
AMOUNTS AND NUMBER OF SHARES
ARE THE SAME):
Shares sold 382,622 415,933
- ----------------------------------------------------------
Shares issued in reinvestment
of dividends 3,065 2,158
- ----------------------------------------------------------
385,687 418,091
Less shares redeemed 381,543 439,503
- ----------------------------------------------------------
Net increase (decrease) from capital
share transactions and total
increase (decrease) in net assets 4,144 (21,412)
- ----------------------------------------------------------
NET ASSETS:
Beginning of year 101,148 122,560
- ----------------------------------------------------------
End of year $105,292 101,148
==========================================================
</TABLE>
<PAGE> 43
6
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
Tax-Exempt California Money Market Fund is an open-end management investment
company organized as a business trust under the laws of Massachusetts.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at amortized cost, which approximates market value. In
the event that a deviation of 1/2 of 1% or more exists between the Fund's $1.00
per share net asset value, calculated at amortized cost, and the net asset value
calculated by reference to market-based values, or if there is any other
deviation that the Board of Trustees believes would result in a material
dilution to shareholders or purchasers, the Board of Trustees will promptly
consider what action should be initiated.
INVESTMENT TRANSACTIONS AND INTEREST INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis and
includes amortization of premium on investments.
FUND SHARE VALUATION AND DIVIDENDS TO SHAREHOLDERS
Fund shares are sold and redeemed on a continuous basis at net asset value. On
each day that the New York Stock Exchange is open for trading, the Fund
determines its net asset value per share at 11:00 a.m. and 3:00 p.m. Chicago
time by dividing the total value of the Fund's investments and other assets,
less liabilities, by the number of Fund shares outstanding. The Fund declares a
daily dividend, equal to its net investment income for that day, payable
monthly. Net investment income consists of all interest income, plus (minus) all
realized gains (losses) on portfolio securities, minus all expenses of the Fund.
FEDERAL INCOME TAXES
The Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies and therefore no federal income tax provision
is required.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Fund has a management agreement with Kemper Financial Services, Inc. (KFS)
and pays a management fee at an annual rate of .22% of the first $500 million of
average daily net assets declining gradually to .15% of average daily net assets
in excess of $3 billion. During the year ended September 30, 1995, the Fund
incurred a management fee of $217,000.
DISTRIBUTION AGREEMENT
The Fund also has a distribution, administration and underwriting agreement with
Kemper Distributors Inc. (KDI). For distribution services, the Fund pays KDI an
annual fee of .33% of average daily net assets of the Fund. KDI has related
service agreements with various firms to provide cash management and other
services for Fund shareholders. Under these agreements, KDI pays such firms at
an annual rate ranging from .15% to .33% of the average daily net assets of
those accounts that they maintain and service. During the year ended September
30, 1995, the Fund incurred a distribution services fee of $325,000, of which
KDI, pursuant to the related service agreements, remitted $324,000 to various
firms, including $247,000 paid to dealers affiliated with KDI.
SHAREHOLDER SERVICES AGREEMENT
Pursuant to a services agreement with the Fund's transfer agent, Kemper Service
Company (KSvC) is the shareholder service agent of the Fund. For the year ended
September 30, 1995, the transfer agent remitted shareholder services fees to
KSvC of $60,000.
<PAGE> 44
7
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EVEREN Clearing Corp. (ECC), formerly Kemper Clearing Corp., was an affiliate of
KFS until September 13, 1995. Pursuant to an agreement with KSvC, ECC performs
bookkeeping, data processing and shareholder services for ECC clients who are
Fund shareholders. For the year ended September 30, 1995, ECC earned $40,000
from KSvC for account maintenance fees.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of KFS.
During the year ended September 30, 1995, the Fund made no direct payments to
its officers and incurred trustees' fees of $12,000 to independent trustees.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended September 30,
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .03 .02 .02 .02 .04
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 3.23 1.97 1.88 2.64 4.02
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .75 .71 .69 .69 .66
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 3.16 1.94 1.87 2.62 3.99
- ---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands) $105,292 101,148 122,560 128,822 150,522
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
FEDERAL TAX STATUS OF 1995 DIVIDENDS
All of the dividends constitute tax-exempt interest which is not taxable for
federal or State of California income tax purposes.
<PAGE> 45
TAX-EXEMPT
CALIFORNIA
MONEY MARKET
FUND
ANNUAL REPORT
SEPTEMBER 30, 1995
This report is not to be distributed unless preceded or
accompanied by a prospectus.
Tax-Exempt California Money Market Fund.
INVESTMENT MANAGER
KEMPER FINANCIAL SERVICES, INC.
PRINCIPAL UNDERWRITER
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street, Chicago, IL 60603
1005530 10/95 (LOGO) printed on recycled paper
<PAGE> 46
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
PART C.
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
(i) Financial statements included in Part A of the Registration
Statement:
Financial Highlights.
(ii) Financial Statements included in Part B of the Registration
Statement:
Statement of assets and liabilities--September 30, 1995.
Statement of operations for the year ended September 30, 1995.
Statement of changes in net assets for each of the two years in
the period ended September 30, 1995.
Portfolio of investments--September 30, 1995.
Notes to financial statements.
Schedules II, III, IV and V have been omitted as the required
information is not present.
Schedule I has been omitted as the required information is presented in
the portfolio of investments at September 30, 1995.
(b) Exhibits
<TABLE>
<S> <C>
99.B1. Agreement and Declaration of Trust.
99.B2. By-Laws.
99.B3. Inapplicable.
99.B4. Text of Share Certificate.
99.B5. Investment Management Agreement.
99.B6. (a) Administration, Shareholder Services and Distribution Agreement.
99.B6. (b) Form of Administration Services and Selling Group Agreement.
99.B7. Inapplicable.
99.B8. Custody Agreement.
99.B9. Agency Agreement.
99.B10. Inapplicable.
99.B11. Report and Consent of Independent Auditors.
99.B12. Inapplicable.
99.B13. Inapplicable.
99.B14.(a) Inapplicable.
99.B14.(b) Inapplicable.
99.B15. See Items 6(a) and (b) above.
99.B16. Performance Calculations.
99.B24. Powers of Attorney.
99.B27. Financial Data Schedule.
99.485.(b) Representation of Counsel (Rule 485(b)).
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Inapplicable.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
As of January 5, 1996, there were 304 holders of record of the sole series
of shares of Registrant.
ITEM 27. INDEMNIFICATION
Article VIII of the Registrant's Agreement and Declaration of Trust
(Exhibit 1 hereto, which is incorporated herein by reference) provides in effect
that the Registrant will indemnify its officers and trustees
C-1
<PAGE> 47
under certain circumstances. However, in accordance with Section 17(h) and 17(i)
of the Investment Company Act of 1940 and its own terms, said Article of the
Agreement and Declaration of Trust does not protect any person against any
liability to the Registrant or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer, or controlling person of the Registrant in the
successful defense of any action, suit, or proceeding) is asserted by such
trustee, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question as to whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
C-2
<PAGE> 48
ITEM 28(a) BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information pertaining to business and other connections of the
Registrant's investment adviser is hereby incorporated by reference to the
section of the Prospectus captioned "Investment Manager and Underwriter," and to
the section of the Statement of Additional Information captioned "Investment
Manager and Underwriter."
Kemper Financial Services, Inc., investment adviser of the Registrant, is
investment adviser of:
Kemper Mutual Funds:
Kemper Technology Fund
Kemper Total Return Fund
Kemper Growth Fund
Kemper Small Capitalization Equity Fund
Kemper Income and Capital Preservation Fund
Kemper Money Market Fund
Kemper National Tax-Free Income Series
Kemper Diversified Income Fund
Kemper High Yield Fund
Cash Equivalent Fund
Kemper U.S. Government Securities Fund
Kemper International Fund
Kemper Portfolios
Kemper State Tax-Free Income Series
Tax-Exempt California Money Market Fund
Kemper Adjustable Rate U.S. Government Fund
Kemper Blue Chip Fund
Kemper Global Income Fund
Kemper Target Equity Fund
Cash Account Trust
Investors Cash Trust
Tax-Exempt New York Money Market Fund
Kemper Value Plus Growth Fund
Kemper Quantitative Equity Fund
Kemper Horizon Fund
Kemper Europe Fund
Kemper Closed-End Funds:
Kemper High Income Trust
Kemper Intermediate Government Trust
Kemper Municipal Income Trust
Kemper Multi-Market Income Trust
Kemper Strategic Municipal Income Trust
The Growth Fund of Spain, Inc.
Kemper Strategic Income Fund
Kemper Financial Services, Inc. also furnishes investment advice to and
manages investment portfolios for other clients including Kemper Investors Fund
and Kemper International Bond Fund.
C-3
<PAGE> 49
Item 28(b) Business and Other Connections of Officers
and Directors of Kemper Financial Services Inc.,
the Investment Advisor
TIMBERS, STEPHEN B.
Director, President, Chief Executive Officer and Chief Investment Officer,
Kemper Financial Services, Inc.
Director, Kemper Distributors, Inc.
Director, Chairman, Zurich Investment Management, Inc.
Director, Chairman, Kemper Service Company
Director, Dreman Value Advisors, Inc.
Director, President, Kemper International Management, Inc.
Trustee and President, Kemper Funds
Director, The LTV Corporation
Director, Investment Analysts Society of Chicago
NEAL, JOHN E.
Director, Chief Operating Officer, Kemper Financial Services, Inc.,
President, Kemper Funds Group
Director, President, Kemper Service Company
Director, Kemper Distributors, Inc.
Director, Zurich Investment Management, Inc.
Director, Dreman Value Advisors, Inc.
Director, Camelot Financial Corporation
Director, Coast Broadcasting Company
Director, Hawaii Kai Development Company
Director, Kacor Gateway, Inc.
Director, Kailua Associates, Inc.
Director, Kacor Trust Deed Company
Director, Community Investment Corporation
Director, Continental Community Development Corporation
Director, President, Kemper Real Estate, Inc.
Director, President, Kemper Cymrot, Inc.
Director, President, Cymrot Management, Inc.
Director, President, FKLA Loire Court, Inc.
Director, Vice President, FKLA Realty Corporation
Director, President, FLA First Nationwide, Inc.
Director, President, FLA Plate Building, Inc.
Director, Vice President, FLA Realty Corporation
Director, Kemper/Lumbermens Properties, Inc.
Director, Senior Vice President, Kemper Real Estate Management Company
Director, KRDC, Inc. Director, Mesa Homes
Director, Mesa Homes Brokerage Company
Director, Mount Doloroes Corporation
Director, Montgomery Gallery, Inc.
Director, Monterey Research Park, Inc.
Director, One Corporate Centre, Inc.
C-4
<PAGE> 50
Director, Pacific Homes, Inc.
Director, Palomar Triad, Inc.
Director, Pine/Battery Properties, Inc.
Director, Rancho and Industrial Property Brokerage, Inc.
Director, Rancho California, Inc.
Director, Rancho Regional Shopping Center, Inc.
Director, Tourelle Corporation
Director, Two Corporate Centre, Inc.
Director, Venture Way, Inc.
Director, Vice President, Kemper Portfolio Corporation
Director, Vice President, KFC Portfolio Corporation
Director, Vice President, KILICO Realty Corporation
Director, President, KI Arnold Industrial, Inc.
Director, President, KI Canyon Park, Inc.
Director, President, KI Centreville, Inc.
Director, President, KI Colorado Boulevard, Inc.
Director, President, KI Dublin Boulevard, Inc.
Director, President, KI LaFiesta Square, Inc.
Director, President, KI Lewinsville, Inc.
Director, President, KI Monterey Research, Inc.
Director, President, KI Olive Street, Inc.
Director, President, KI Thornton Boulevard, Inc.
Director, President, KI Sutter Street, Inc.
Director, President, KR 77 Fitness Center, Inc.
Director, President, KR Avondale Redmond, Inc.
Director, President, KR Black Mountain, Inc.
Director, President, KR Brannan Resources, Inc.
Director, President, KR Clay Capital, Inc.
Director, President, KR Cranbury, Inc.
Director, President, KR Delta Wetlands, Inc.
Director, President, KR Gainesville, Inc.
Director, President, KR Hotels, Inc.
Director, President, KR Lafayette Apartments, Inc.
Director, President, KR Lafayette BART, Inc.
Director, President, KR Palm Plaza, Inc.
Director, President, KR Red Hill Associates, Inc.
Director, President, KR Seagate/Gateway North, Inc.
Director, President, KR Venture Way, Inc.
Director, President, KR Walnut Creek, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
Director, KRDC, Inc.
Director, RespiteCare
Director, President, SMS Realty Corp.
Director, Vice President, Kemper Funds
Urban Shopping Centers, Inc.
C-5
<PAGE> 51
PETERS, JOHN E.
Director, Senior Executive Vice President, Kemper Financial
Services, Inc.
Director, Dreman Value Advisors, Inc.
Director, President, Kemper Distributors, Inc.
Vice President, Zurich Investment Management, Inc.
Vice President, Kemper Funds
Director, Kemper Service Company
BEIMFORD, JR., JOSEPH P.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Galaxy Offshore, Inc.
Vice President, Investors Cash Trust
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Global Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper International Bond Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Municipal Income Trust
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Portfolios
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Income Fund
Vice President, Kemper Strategic Municipal Income Trust
Vice President, Kemper U.S. Government Securities Fund
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
CHAPMAN II, WILLIAM E.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
C-6
<PAGE> 52
COXON, JAMES H.
Executive Vice President, Kemper Financial Services, Inc.
Director, Vice President, Galaxy Offshore, Inc.
Executive Vice President, Kemper Asset Management Company
FERRO, DENNIS H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper International Fund
Director, Managing Director-Equities, Kemper Investment Management
Company Limited
Vice President, Kemper Investors Fund
Vice President, Kemper Target Equity Fund
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe Fund
GREENAWALT, JAMES L.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Distributors, Inc.
JOHNS, GORDON K.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Global Income Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper International Bond Fund
Vice President, Kemper International Management, Inc.
Managing Director and Joint Secretary, Kemper Investment
Management Company Limited
Vice President, Kemper Multi-Market Income Trust
Director, Thames Heritage Parade Limited
LANGBAUM, GARY A.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Total Return Fund
Vice President, Kemper Investors Fund
REYNOLDS, STEVEN H.
Executive Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
Vice President, Kemper Total Return Fund
Vice President, Kemper Growth Fund
Vice President, Kemper Small Capitalization Equity Fund
Vice President, Kemper International Fund
Vice President, Kemper Blue Chip Fund
C-7
<PAGE> 53
Vice President, Kemper Value Plus Growth Fund
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Horizon Fund
Vice President, Kemper Investors Fund
Vice President, The Growth Fund of Spain, Inc.
Vice President, Kemper Europe Fund
SILIGMUELLER, DALE S.
Executive Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Kemper Service Company
BUKOWSKI, DANIEL J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Quantitative Equity Fund
Vice President, Kemper Value Plus Growth Fund
BUTLER, DAVID H.
Senior Vice President, Kemper Financial Services, Inc.
CERVONE, DAVID M.
Senior Vice President, Kemper Financial Services, Inc.
CESSINE, ROBERT S.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Income and Capital Preservation Fund
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
CHESTER, TRACY McCORMICK
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Blue Chip Fund
Vice President, Kemper Target Equity Fund
Vice President, Kemper Value Plus Growth Fund
CIARLELLI, ROBERT W.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Kemper Service Company
COLLECCHIA, FRANK E.
Senior Vice President, Kemper Financial Services, Inc.
Senior Investment Officer, Federal Kemper Life Assurance
Company
Senior Investment Officer, Fidelity Life Association
Vice President, FKLA Loire Court, Inc.
Vice President, FLA First Nationwide, Inc.
Vice President, FLA Plate Building, Inc.
Vice President, Galaxy Offshore, Inc.
C-8
<PAGE> 54
Senior Investment Officer, Kemper Investors Life Insurance
Company
Vice President, KI Arnold Industrial, Inc.
Vice President, KI Canyon Park, Inc.
Vice President, KI Centreville, Inc.
Vice President, KI Colorado Boulevard, Inc.
Vice President, KI Dublin Boulevard, Inc.
Vice President, KI LaFiesta Square, Inc.
Vice President, KI Lewinsville, Inc.
Vice President, KI Monterey Research, Inc.
Vice President, KI Olive Street, Inc.
Vice President, KI Sutter Street, Inc.
Vice President, KI Thornton Boulevard, Inc.
Vice President, KR 77 Fitness Center, Inc.
Vice President, KR Avondale Redmond, Inc.
Vice President, KR Black Mountain, Inc.
Vice President, KR Brannan Resources, Inc.
Vice President, KR Clay Capital, Inc.
Vice President, KR Cranbury, Inc.
Vice President, KR Delta Wetlands, Inc.
Vice President, KR Gainesville, Inc.
Vice President, KR Halawa Associates, Inc.
Vice President, KR Hotels, Inc.
Vice President, KR Lafayette Apartments, Inc.
Vice President, KR Lafayette BART, Inc.
Vice President, KR Palm Plaza, Inc.
Vice President, KR Red Hill Associates, Inc.
Vice President, KR Seagate/Gateway North, Inc.
Vice President, KR Venture Way, Inc.
Vice President, KR Walnut Creek, Inc.
COLLORA, PHILIP J.
Senior Vice President and Assistant Secretary, Kemper Financial
Services, Inc.
Vice President and Secretary, Kemper Funds
Assistant Secretary, Kemper International Management, Inc.
DIERENFELDT, DAVID F.
Senior Vice President, Associate General Counsel,
Assistant Secretary, Kemper Financial Services, Inc.
Vice President and Secretary, Kemper Distributors, Inc.
Secretary, Dreman Value Advisors, Inc.
Assistant Secretary, Galaxy Offshore, Inc.
Director, Secretary, INVEST Financial Corporation
Secretary, INVEST Financial Corporation Holding Company
Assistant Secretary, Investors Brokerage Services
Insurance Agency, Inc.
C-9
<PAGE> 55
Assistant Secretary, Investors Brokerage Services, Inc.
Secretary, Zurich Investment Management, Inc.
Assistant Secretary, Kemper International Management, Inc.
Assistant Secretary, Kemper Investment Management Company
Limited
Vice President and Assistant Secretary, Kemper Investors Fund
Secretary, Kemper Service Company
DUDASIK, PATRICK H.
Senior Vice President, Kemper Financial Services, Inc.
Executive Vice President, Chief Financial Officer and Treasurer,
Dreman Value Advisors, Inc.
Vice President and Treasurer, Zurich Investment Management, Inc.
Treasurer and Chief Financial Officer, Kemper Distributors, Inc.
Treasurer and Chief Financial Officer, Kemper Service Company
Director and Treasurer, Kemper Investment Management Company
Limited
DUFFY, JEROME L.
Senior Vice President, Kemper Financial Services, Inc.
Treasurer, Kemper Funds
GALLAGHER, MICHAEL L.
Senior Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
GLASSMAN, HARVEY
Senior Vice President, Kemper Financial Services, Inc.
GOERS, RICHARD A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
INNES, BRUCE D.
Senior Vice President, Kemper Financial Services, Inc.
Co-President, International Association of Corporate and
Professional Recruiters
KLEIN, GEORGE
Senior Vice President, Kemper Financial Services, Inc.
Director, Executive Vice President, Zurich Investment Management, Inc.
C-10
<PAGE> 56
KORTH, FRANK D.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Technology Fund
McNAMARA, MICHAEL A.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
MIER, CHRISTOPHER J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper National Tax-Free Income Series
Vice President, Kemper Municipal Income Trust
Vice President, Kemper State Tax-Free Income Series
Vice President, Kemper Strategic Municipal Income Trust
MURRIHY, MAURA J.
Senior Vice President, Kemper Financial Services, Inc.
NATHANSON, IRA
Senior Vice President, Kemper Financial Services, Inc.
RABIEGA, CRAIG F.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
RACHWALSKI, JR. FRANK J.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
Vice President, Investors Cash Trust
Vice President, Kemper Investors Fund
Vice President, Kemper Money Market Fund
Vice President, Kemper Portfolios
Vice President, Tax-Exempt California Money Market Fund
Vice President, Tax-Exempt New York Money Market Fund
REGNER, THOMAS M.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Horizon Fund
RESIS, JR., HARRY E.
Senior Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
C-11
<PAGE> 57
Vice President, Kemper High Income Trust
Vice President, Kemper High Yield Fund
Vice President, Kemper Investors Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
SCHUMACHER, ROBERT T.
Senior Vice President, Kemper Financial Services, Inc.
SMITH, JR., EDWARD BYRON
Senior Vice President, Kemper Financial Services, Inc.
VINCENT, CHRISTOPHER T.
Senior Vice President, Kemper Financial Services, Inc.
First Vice President, Zurich Investment Management, Inc.
BAZAN, KENNETH M.
First Vice President, Kemper Financial Services, Inc.
Director, K-P Greenway, Inc.
Director, K-P Plaza Dallas, Inc.
Director, Kemper/Prime Acquisition Fund, Inc.
BOEHM, JONATHAN J.
First Vice President, Kemper Financial Services, Inc.
Senior Vice President, Kemper Service Company
BURROW, DALE R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
BYRNES, ELIZABETH A.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Adjustable Rate U.S. Government Fund
Vice President, Kemper Intermediate Government Trust
CHIEN, CHRISTINE
First Vice President, Kemper Financial Services, Inc.
DeMAIO, CHRIS C.
First Vice President, Kemper Financial Services, Inc.
Vice President and Chief Accounting Officer, Kemper Service
Company
DEXTER, STEPHEN P.
First Vice President, Kemper Financial Services, Inc.
DOYLE, DANIEL J.
First Vice President, Kemper Financial Services, Inc.
C-12
<PAGE> 58
FENGER, JAMES E.
First Vice President, Kemper Financial Services, Inc.
HALE, DAVID D.
First Vice President, Kemper Financial Services, Inc.
HARRINGTON, MICHAEL E.
First Vice President, Kemper Financial Services, Inc.
HORTON, ROBERT J.
First Vice President, Kemper Financial Services, Inc.
JACOBS, PETER M.
First Vice President, Kemper Financial Services, Inc.
KEELEY, MICHELLE M.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Intermediate Government Trust
Vice President, Kemper Portfolios
KIEL, CAROL L.
First Vice President, Kemper Financial Services, Inc.
LAUGHLIN, ANN M.
First Vice President, Kemper Financial Services, Inc.
LENTZ, MAUREEN P.
First Vice President, Kemper Financial Services, Inc.
McCRINDLE-PETRARCA, SUSAN
First Vice President, Kemper Financial Services, Inc.
MINER, EDWARD
First Vice President, Kemper Financial Services, Inc.
MURRAY, SCOTT S.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
NORRIS, JOHNSTON A.
First Vice President, Kemper Financial Services, Inc.
PAYNE, III, ROBERT D.
First Vice President, Kemper Financial Services, Inc.
PANOZZO, ROBERTA L.
First Vice President, Kemper Financial Services, Inc.
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<PAGE> 59
RADIS, STEVE A.
First Vice President, Kemper Financial Services, Inc.
RATEKIN, DIANE E.
First Vice President, Assistant General Counsel and Assistant
Secretary, Kemper Financial Services, Inc.
Assistant Secretary, Kemper Distributors, Inc.
SILVIA, JOHN E.
First Vice President, Kemper Financial Services, Inc.
STUEBE, JOHN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Cash Account Trust
Vice President, Cash Equivalent Fund
THOUIN, EDITH A.
First Vice President, Kemper Financial Services, Inc.
Director-European Equities, Kemper Investment Management Company Limited
Vice President, Kemper Europe Fund
TRUTTER, JONATHAN W.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Diversified Income Fund
Vice President, Kemper Multi-Market Income Trust
Vice President, Kemper Strategic Income Fund
WETHERALD, ROBERT F.
First Vice President, Kemper Financial Services, Inc.
WILLSON, STEPHEN R.
First Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Strategic Municipal Income Trust
WITTNEBEL, MARK E.
First Vice President, Kemper Financial Services, Inc.
BARRY, JOANN M.
Vice President, Kemper Financial Services, Inc.
BODEM, RICHARD A.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
BURSHTAN, DAVID H.
Vice President, Kemper Financial Services, Inc.
C-14
<PAGE> 60
CARNEY, ANNE T.
Vice President, Kemper Financial Services, Inc.
CARTER, PAUL J.
Vice President, Kemper Financial Services, Inc.
CHRISTIANSEN, HERBERT A.
Vice President, Kemper Financial Services, Inc.
First Vice President, Kemper Service Company
COHEN, JERRI I.
Vice President, Kemper Financial Services, Inc.
ESOLA, CHARLES J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
FRIHART, THORA A.
Vice President, Kemper Financial Services, Inc.
GERACI, AUGUST L.
Vice President, Kemper Financial Services, Inc.
GOLAN, JAMES S.
Vice President, Kemper Financial Services, Inc.
HESS, THOMAS L.
Vice President, Kemper Financial Services, Inc.
HUOT, LISA L.
Vice President, Kemper Financial Services, Inc.
KARWOWSKI, KENNETH F.
Vice President, Kemper Financial Services, Inc.
KNAPP, WILLIAM M.
Vice President, Kemper Financial Services, Inc.
KOCH, DEBORAH L.
Vice President, Kemper Financial Services, Inc.
KOURY, KATHRYN E.
Vice President, Kemper Financial Services, Inc.
KRANZ, KATHY J.
Vice President, Kemper Financial Services, Inc.
C-15
<PAGE> 61
KRUEGER, PAMELA D.
Vice President, Kemper Financial Services, Inc.
KYCE, JOYCE
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
LeFEBVRE, THOMAS J.
Vice President, Kemper Financial Services, Inc.
MANGIPUDI, V. RAO
Vice President, Kemper Financial Services, Inc.
McGOVERN, KAREN B.
Vice President, Kemper Financial Services, Inc.
MILLER, MAUREEN A.
Vice President, Kemper Financial Services, Inc.
MILLIGAN, BRIAN J.
Vice President, Kemper Financial Services, Inc.
Assistant Treasurer, Kemper Real Estate, Inc.
Assistant Treasurer, Kemper Cymrot, Inc.
Assistant Treasurer, Kemper Cymrot Management, Inc.
Assistant Treasurer, FKLA Loire Court, Inc.
Assistant Treasurer, FKLA Realty Corporation
Assistant Treasurer, FLA First Nationwide, Inc.
Assistant Treasurer, FLA Plate Building, Inc.
Assistant Treasurer, FLA Realty Corporation
Assistant Treasurer, Kemper Portfolio Corporation
Assistant Treasurer, KFC Portfolio Corporation
Assistant Treasurer, KILICO Realty Corporation
Assistant Treasurer, KI Arnold Industrial, Inc.
Assistant Treasurer, KI Canyon Park, Inc.
Assistant Treasurer, KI Centreville, Inc.
Assistant Treasurer, KI Colorado Boulevard, Inc.
Assistant Treasurer, KI Dublin Boulevard, Inc.
Assistant Treasurer, KI LaFiesta Square, Inc.
Assistant Treasurer, KI Lewinsville, Inc.
Assistant Treasurer, KI Monterey Research, Inc.
Assistant Treasurer, KI Olive Street, Inc.
Assistant Treasurer, KI Thornton Boulevard, Inc.
Assistant Treasurer, KI Sutter Street, Inc.
Assistant Treasurer, KR 77 Fitness Center, Inc.
Assistant Treasurer, KR Avondale Redmond, Inc.
Assistant Treasurer, KR Black Mountain Inc.
Assistant Treasurer, KR Brannon Resources, Inc.
Assistant Treasurer, KR Clay Capital, Inc.
Assistant Treasurer, KR Cranbury, Inc.
Assistant Treasurer, KR Delta Wetlands, Inc.
C-16
<PAGE> 62
Assistant Treasurer, KR Gainesville, Inc.
Assistant Treasurer, KR Hotels, Inc.
Assistant Treasurer, KR Lafayette Apartments, Inc.
Assistant Treasurer, KR Lafayette BART, Inc.
Assistant Treasurer, KR Palm Plaza, Inc.
Assistant Treasurer, KR Red Hill Associates, Inc.
Assistant Treasurer, KR Seagate/Gateway North, Inc.
Assistant Treasurer, KR Venture Way, Inc.
Assistant Treasurer, KR Walnut Creek, Inc.
MITCHELL, KATHERINE H.
Vice President, Kemper Financial Services, Inc.
MURPHY, THOMAS M.
Vice President, Kemper Financial Services, Inc.
NEVILLE, BRIAN P.
Vice President, Kemper Financial Services, Inc.
PANOZZO, ALBERT R.
Vice President, Kemper Financial Services, Inc.
PONTECORE, SUSAN E.
Vice President, Kemper Financial Services, Inc.
QUADRINI, LISA L.
Vice President, Kemper Financial Services, Inc.
ROKOSZ, PAUL A.
Vice President, Kemper Financial Services, Inc.
ROSE, KATIE M.
Vice President, Kemper Financial Services, Inc.
SHULTZ, KAREN D.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
SMITH, ROBERT G.
Vice President, Kemper Financial Services, Inc.
SOPHER, EDWARD O.
Vice President, Kemper Financial Services, Inc.
STROMM, LAWRENCE D.
Vice President, Kemper Financial Services, Inc.
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<PAGE> 63
TEPPER, SHARYN A.
Vice President, Kemper Financial Services, Inc.
VANDEMERKT, RICHARD J.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WATKINS, JAMES K.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Service Company
WERTH, ELIZABETH C.
Vice President, Kemper Financial Services, Inc.
Vice President, Kemper Distributors, Inc.
Assistant Secretary, Kemper Mutual Funds
Assistant Secretary, Kemper International Bond Fund
Assistant Secretary, Kemper Target Equity Fund
Assistant Secretary, Kemper-Dreman Fund, Inc.
Assistant Secretary, Kemper Horizon Fund
Assistant Secretary, Kemper Europe Fund
WIZER, BARBARA K.
Vice President, Kemper Financial Services, Inc.
ZURAWSKI, CATHERINE N.
Vice President, Kemper Financial Services, Inc.
C-18
<PAGE> 64
ITEM 29. PRINCIPAL UNDERWRITER
(a) Kemper Distributors, Inc. acts as principal underwriter of the
Registrant's shares and acts as principal underwriter of the Kemper Mutual
Funds, Kemper Investors Fund, Kemper International Bond
Fund and Kemper-Dreman Fund, Inc.
(b) Information on the officers and directors of Kemper Distributors,
Inc., principal underwriter for the Registrant is set forth below. The
principal business address is 120 South LaSalle Street, Chicago, Illinois
60603.
<TABLE>
<CAPTION>
POSITIONS AND
POSITIONS AND OFFICES OFFICES WITH
NAME WITH UNDERWRITER REGISTRANT
---- --------------------- -------------
<S> <C> <C>
John E. Peters Principal Director, President Vice President
William E. Chapman, II Director, Executive Vice President None
James L. Greenawalt Director, Executive Vice President None
John E. Neal Director Vice President
Stephen B. Timbers Director President, Trustee
Patrick H. Dudasik Financial Principal, Treasurer
and Chief Financial Officer None
Linda A. Bercher Senior Vice President None
Thomas V. Bruns Senior Vice President None
Terry Cunningham Senior Vice President None
Daniel T. O'Lear Senior Vice President None
John H. Robison, Jr. Senior Vice President None
Henry J. Schulthesz Senior Vice President None
David F. Dierenfeldt Vice President, Secretary None
Carlene D. Merold Vice President None
Elizabeth C. Werth Vice President Assistant Secretary
Diane E. Ratekin Assistant Secretary None
</TABLE>
(c) Not applicable.
C-19
<PAGE> 65
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All such accounts, books and other documents are maintained at the offices
of the Registrant, the offices of Registrant's investment adviser, Kemper
Financial Services, Inc. and Kemper Distributors, Inc., the Registrant's
principal underwriter, 120 South LaSalle Street, Chicago, Illinois 60603 or, in
the case of records concerning custodial functions, at the offices of the
custodian, Investors Fiduciary Trust Company ("IFTC"), 127 West 10th Street,
Kansas City, Missouri 64105 or, in the case of records concerning transfer
agency functions, at the offices of IFTC and of the Shareholder Service Agent,
Kemper Service Company, 811 Main Street, Kansas City, Missouri 64105.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
Not applicable.
C-20
<PAGE> 66
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago and State of Illinois, on the 22nd day
of January, 1996.
TAX-EXEMPT CALIFORNIA MONEY MARKET
FUND
by /s/ STEPHEN B. TIMBERS
-----------------------------------
Stephen B. Timbers, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on January 22, 1996 on behalf of
the following persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- --------------------------------------------- ---------------------------------------------
<C> <S>
/s/ STEPHEN B. TIMBERS President
- --------------------------------------------- (Principal Executive Officer) and Trustee
Stephen B. Timbers
/s/ DAVID W. BELIN* Trustee
- ---------------------------------------------
David W. Belin
/s/ LEWIS A. BURNHAM* Trustee
- ---------------------------------------------
Lewis A. Burnham
/s/ DONALD L. DUNAWAY* Trustee
- ---------------------------------------------
Donald L. Dunaway
/s/ ROBERT B. HOFFMAN* Trustee
- ---------------------------------------------
Robert B. Hoffman
/s/ DONALD R. JONES* Trustee
- ---------------------------------------------
Donald R. Jones
/s/ SHIRLEY D. PETERSON* Trustee
- ---------------------------------------------
Shirley D. Peterson
/s/ WILLIAM P. SOMMERS* Trustee
- ---------------------------------------------
William P. Sommers
/s/ JEROME L. DUFFY Treasurer
- --------------------------------------------- (Principal Financial and Accounting Officer)
Jerome L. Duffy
* Philip J. Collora signs this document
pursuant to powers of attorney filed
herein.
/s/ PHILIP J. COLLORA
- ---------------------------------------------
Philip J. Collora
</TABLE>
<PAGE> 67
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
-------
<S> <C>
99.B1. Agreement and Declaration of Trust.
99.B2. By-Laws.
99.B3. Inapplicable.
99.B4. Text of Share Certificate.
99.B5. Investment Management Agreement.
99.B6. (a) Administration, Shareholder Services and Distribution
Agreement.
99.B6. (b) Form of Administration Services and Selling Group Agreement.
99.B7. Inapplicable.
99.B8. Custody Agreement.
99.B9. Agency Agreement.
99.B10. Inapplicable.
99.B11. Report and Consent of Independent Auditors.
99.B12. Inapplicable.
99.B13. Inapplicable.
99.B14.(a) Inapplicable.
99.B14.(b) Inapplicable.
99.B15. See Items 6(a) and (b) above.
99.B16. Performance Calculations.
99.B24. Powers of Attorney.
27. Financial Data Schedule.
99.485.(b) Representation of Counsel (Rule 485(b)).
</TABLE>
<PAGE> 1
EXHIBIT 99.B1.
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
--------------------------------------
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts, this 25th day of February, 1987, by the Trustees
hereunder, and by the holders of shares of beneficial interest to
be issued hereunder as hereinafter provided.
WITNESSETH
WHEREAS, the Trustees hereunder are desirous of forming a
trust for the purposes of carrying on the business of a
management investment company; and
WHEREAS, in furtherance of such purposes, the Trustees are
acquiring and may hereafter acquire assets and properties, to
hold and manage as trustees of a Massachusetts voluntary
association with transferable shares in accordance with the
provisions hereinafter set forth,
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets and properties, which
they may from time to time acquire in any manner as Trustees
hereunder IN TRUST to manage and dispose of the same upon the
following terms and conditions for the pro rata benefit of the
holders from time to time of shares in this Trust as hereinafter
set forth.
ARTICLE I
---------
Name and Definitions
--------------------
Name and Registered Agent
-------------------------
Section 1. This Trust shall be known as Tax-Exempt
California Money Market Fund and the Trustees shall conduct the
business of the Trust under that name or any other name as they
may from time to time determine. The registered agent for the
Trust in Massachusetts shall be CT Corporation System whose
address is 2 Oliver Street, Boston, Massachusetts or such other
person as the Trustees may from time to time designate.
<PAGE> 2
Definitions
-----------
Section 2. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts voluntary
association established by this Agreement and Declaration of
Trust, as amended from time to time, pursuant to Massachusetts
General Laws, Chapter 182;
(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV and then in
office;
(c) "Shares" mean the equal proportionate transferable
units of interest into which the beneficial interest in the Trust
shall be divided from time to time or, if more than one series is
authorized under or pursuant to Article III, the equal
proportionate transferable units of interest into which each such
series shall be divided from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of
1940 (and any successor statute) and the Rules and Regulations
thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal Underwriter" and
"vote of a majority of the outstanding voting securities" shall
have the meanings given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Agreement and
Declaration of Trust as amended or restated from time to time;
and
(h) "By-Laws" shall mean the By-Laws of the Trust as
amended from time to time.
(i) "Net asset value" shall have the meaning set forth in
Section 6 of Article VI hereof;
ARTICLE II
Nature and Purpose
------------------
The Trust is a voluntary association (commonly known as a
business trust) of the type referred to in Chapter 182 of the
General Laws of the Commonwealth of Massachusetts. The Trust is
-2-
<PAGE> 3
not intended to be, shall not be deemed to be, and shall not be
treated as, a general or a limited partnership, joint venture,
corporation or joint stock company, nor shall the Trustees or
Shareholders or any of them for any purpose be deemed to be, or
be treated in any way whatsoever as though they were, liable or
responsible hereunder as partners or joint venturers. The
purpose of the Trust is to engage in, operate and carry on the
business of an open-end management investment company and to do
any and all acts or things as are necessary, convenient,
appropriate, incidental or customary in connection therewith.
ARTICLE III
Shares
------
Division of Beneficial Interest
-------------------------------
Section 1. The Shares of the Trust shall be issued in one
or more series as the Trustees may, without Shareholder approval,
authorize from time to time. Each series shall be preferred over
all other series in respect of the assets allocated to that
series as hereinafter provided. The beneficial interest in each
series shall at all times be divided into Shares (without par
value) of such series, each of which shall represent an equal
proportionate interest in such series with each other Share of
the same series. The number of Shares authorized shall be
unlimited, and the Shares so authorized may be represented in
part by fractional Shares. The Trustees may from time to time
divide or combine the shares of any series into a greater or
lesser number without thereby changing the proportionate
beneficial interests in the series. Without limiting the
authority of the Trustees set forth in this Section 1 to
establish and designate any further series or class, the Trustees
hereby establish and designate one series of Shares to be known
as the "Initial Series." The establishment and designation of
any series of Shares in addition to the foregoing shall be
effective upon the execution by a majority of the then Trustees
of an instrument setting forth such establishment and designation
and the relative rights and preferences of such series. As
provided in Article IX, Section 1 hereof, any series of Shares
(whether or not there shall then be Shares outstanding of said
series) may be terminated by the Trustees by written notice to
the Shareholders of such series or by the vote of the
Shareholders of such series entitled to vote more than fifty
percent (50%) of the votes entitled to be cast on the matter. In
the event of any such termination, a majority of the then
Trustees shall execute an instrument setting forth the
termination of such series.
-3-
<PAGE> 4
Ownership of Shares
-------------------
Section 2. The ownership and transfer of Shares shall be
recorded on the books of the Trust or its transfer or similar
agent. No certificates certifying the ownership of Shares shall
be issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they consider
appropriate for the issuance of Share certificates, the transfer
of Shares and similar matters. The record books of the Trust as
kept by the Trust or any transfer or similar agent of the Trust,
as the case may be, shall be conclusive as to who are the
Shareholders of each series and as to the number of Shares of
each series held from time to time by each Shareholder.
Investments in the Trust; Assets of a Series
--------------------------------------------
Section 3. The Trustees may issue Shares of the Trust to
such persons and on such terms and, subject to any requirements
of law, for such consideration, which may consist of cash or
tangible or intangible property or a combination thereof, as they
may from time to time authorize.
All consideration received by the Trust for the issue or
sale of Shares of a particular series, together with all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to
such series of Shares for all purposes, subject only to the
rights of creditors, and shall be so handled upon the books of
account of the Trust and are herein referred to as "assets of"
such series.
Right to Refuse Orders
----------------------
Section 4. The Trust by action of its Trustees shall have
the right to refuse to accept any subscription for its Shares at
any time without any cause or reason therefore whatsoever.
Without limiting the foregoing, the Trust shall have the right
not to accept subscriptions under circumstances or in amounts as
the Trustees in their sole discretion consider to be
disadvantageous to existing Shareholders and the Trust may from
time to time set minimum and/or maximum amounts which may be
invested in Shares by a subscriber.
-4-
<PAGE> 5
Order in Proper Form
--------------------
Section 5. The criteria for determining what constitutes an
order in proper form and the time of receipt of such an order by
the Trust shall be prescribed by resolution of the Trustees.
When Shares Become Outstanding
------------------------------
Section 6. Shares subscribed for and for which an order in
proper form has been received shall be deemed to be outstanding
as of the time of acceptance of the order therefor and the
determination of the net price thereof, which price shall be then
deemed to be an asset of the Trust.
Merger or Consolidation
-----------------------
Section 7. In connection with the acquisition of all or
substantially all the assets or stock of another investment
company, investment trust, or of a company classified as a
personal holding company under Federal Income Tax laws, the
Trustees may issue or cause to be issued Shares of a series and
accept in payment therefor, in lieu of cash, such assets at their
market value, or such stock at the market value of the assets
held by such investment company or investment trust, either with
or without adjustment for contingent costs or liabilities.
No Preemptive Rights, Etc.
--------------------------
Section 8. Shareholders shall have no preemptive or other
right to receive, purchase or subscribe for any additional Shares
or other securities issued by the Trust. The Shareholders shall
have no appraisal rights with respect to their Shares and, except
as otherwise determined by the Trustees in their sole discretion,
shall have no exchange or conversion rights with respect to their
Shares.
Status of Shares and Limitation of Personal Liability
-----------------------------------------------------
Section 9. Shares shall be deemed to be personal property
giving only the rights provided in this instrument. Every
Shareholder by virtue of having become a Shareholder shall be
held to have expressly assented and agreed to the terms of the
Declaration of Trust and to have become a party thereto. The
death of a Shareholder during the continuance of the Trust shall
not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees,
-5-
<PAGE> 6
but only to the rights of said decedent under this Trust.
Ownership of Shares shall not entitle the Shareholder to any
title in or to the whole or any part of the Trust property or
right to call for a partition or division of the same or for an
accounting, nor shall the ownership of Shares constitute the
Shareholders partners. Neither the Trust nor the Trustees, nor
any officer, employee or agent of the Trust shall have any power
to bind personally any Shareholder, nor except as specifically
provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
Shareholder Inspection Rights
-----------------------------
Section 10. Any Shareholder or his agent may inspect and
copy during normal business hours any of the following documents
of the Trust: By-Laws, minutes of the proceedings of the
Shareholders and annual financial statements of the Trust,
including a balance sheet and financial statements of operations.
The foregoing rights of inspection of Shareholders of the Trust
are the exclusive and sole rights of the Shareholders with
respect thereto and no Shareholder of the Trust shall have, as a
Shareholder, the right to inspect or copy any of the books,
records or other documents of the Trust except as specifically
provided in this Section 10 of this Article III or except as
otherwise determined by the Trustees.
ARTICLE IV
The Trustees
------------
Number, Designation, Election, Term, Etc.
-----------------------------------------
Section 1.
----------
(a) Initial Trustee. Upon his execution of this
Declaration of Trust or a counterpart hereof or some other
writing in which he accepts such Trusteeship and agrees to the
provisions hereof, Philip J. Collora shall become a Trustee
hereof.
(b) Number. The Trustees serving as such, whether named
above or hereafter becoming Trustees, may increase or decrease
the number of Trustees to a number other than the number
theretofore determined which number shall not be less than three
nor more than fifteen except during the period that the initial
Trustee named above is sole Trustee. No decrease in the number
-6-
<PAGE> 7
of Trustees shall have the effect of removing any Trustee from
office prior to the expiration of his term, but the number of
Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 1.
(c) Term and Election. Each Trustee, whether named above
or hereafter becoming a Trustee, shall serve as a Trustee until
the next meeting of Shareholders, if any, called for the purpose
of considering the election or re-election of such Trustee or of
a successor to such Trustee, and until the election and
qualification of his successor, if any, elected at such meeting,
or until such Trustee sooner dies, resigns, retires or is
removed. Upon the election and qualification of a new Trustee,
the Trust estate shall vest in the new Trustee (together with the
continuing or other new Trustees) without any further act or
conveyance. Prior to any sale of Shares pursuant to any public
offering, the initial Trustee named above shall have the right to
appoint other persons as Trustees each to serve with such initial
Trustee as aforesaid until the first meeting of Shareholders
called for the purpose of the election or re-election of such
Trustee or of a successor to such Trustee.
(d) Resignation and Retirement. Any Trustee may resign his
trust or retire as a Trustee, by written instrument signed by him
and delivered to the other Trustees or to the Chairman of the
Board, if any, the President or the Secretary of the Trust, and
such resignation or retirement shall take effect upon such
delivery or upon such later date as is specified in such
instrument.
(e) Removal. Any Trustee may be removed for cause at any
time by written instrument, signed by at least a majority of the
number of Trustees prior to such removal, specifying the date
upon which such removal shall become effective. Any Trustee may
be removed with or without cause (i) by the vote of the
Shareholders entitled to vote more than fifty percent (50%) of
the votes entitled to be cast on the matter voting together
without regard to series or class at any meeting called for such
purpose, or (ii) by a written consent filed with the custodian of
the Trust's portfolio securities and executed by the Shareholders
entitled to vote more than fifty percent (50%) of the votes
entitled to be cast on the matter voting together without regard
to series.
Whenever ten or more Shareholders of record who have been
such for at least six months preceding the date of application,
and who hold in the aggregate Shares constituting at least one
percent of the outstanding Shares of the Trust, shall apply to
the Trustees in writing, stating that they wish to communicate
with other Shareholders with a view to obtaining signatures to a
request for a meeting to consider removal of a Trustee and
accompanied by a form of communication and request that they wish
-7-
<PAGE> 8
to transmit, the Trustees shall within five business days after
receipt of such application inform such applicants as to the
approximate cost of mailing to the Shareholders of record the
proposed communication and form of request. Upon the written
request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing,
the Trustees shall, within reasonable promptness, mail such
material to all Shareholders of record at their addresses as
recorded on the books of the Trust. Notwithstanding the
foregoing, the Trustees may refuse to mail such material on the
basis and in accordance with the procedures set forth in the last
two paragraphs of Section 16(c) of the 1940 Act.
(f) Vacancies. Any vacancy or anticipated vacancy
resulting from any reason, including without limitation the
death, resignation, retirement, removal or incapacity of any of
the Trustees, or resulting from an increase in the number of
Trustees by the other Trustees may (but so long as there are at
least three remaining Trustees, need not unless required by the
1940 Act) be filled either by a majority of the remaining
Trustees, even if less than a quorum, through the appointment in
writing of such other person as such remaining Trustees in their
discretion shall determine or, whenever deemed appropriate by the
remaining Trustees, by the election by the Shareholders, at a
meeting called for such purpose, of a person to fill such
vacancy. Upon the appointment or election and qualification of a
new Trustee as aforesaid, the Trust estate shall vest in the new
Trustee, together with the continuing Trustees, without any
further act or conveyance, except that any such appointment or
election in anticipation of a vacancy to occur by reason of
retirement, resignation, or increase in number of Trustees to be
effective at a later date shall become effective only at or after
the effective date of said retirement, resignation, or increase
in number of Trustees.
(g) Mandatory Election by Shareholders. Notwithstanding
the foregoing provisions of this Section 1, the Trustees shall
call a meeting of the Shareholders for the election of one or
more Trustees at such time or times as may be required in order
that the provisions of the 1940 Act may be complied with, and the
authority hereinabove provided for the Trustees to appoint any
successor Trustee or Trustees shall be restricted if such
appointment would result in failure of the Trust to comply with
any provision of the 1940 Act.
(h) Effect of Death, Resignation, Etc. The death,
resignation, retirement, removal or incapacity of the Trustees,
or any one of them, shall not operate to annul or terminate the
Trust or to revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Declaration
of Trust.
-8-
<PAGE> 9
(i) No Accounting. Except under circumstances which would
justify his removal for cause, no person ceasing to be a Trustee
as a result of his death, resignation, retirement, removal or
incapacity (nor the estate of any such person) shall be required
to make an accounting to the Shareholders or remaining Trustees
upon such cessation.
Powers
------
Section 2. The Trustees, subject only to the specific
limitations contained in this Declaration of Trust or otherwise
imposed by the 1940 Act or other applicable law, shall have,
without further or other authorization and free from any power or
control of the Shareholders, full, absolute and exclusive power,
control and authority over the Trust assets and the business and
affairs of the Trust to the same extent as if the Trustees were
the sole and absolute owners thereof in their own right and to do
all such acts and things as in their sole judgment and discretion
are necessary and incidental to, or desirable for the carrying
out of any of the purposes of the Trust or conducting the
business of the Trust. Any determination made in good faith by
the Trustees of the purposes of the Trust or the existence of any
power or authority hereunder shall be conclusive. In construing
the provisions of this Declaration of Trust, there shall be a
presumption in favor of the grant of power and authority to the
Trustees. Without limiting the foregoing, the Trustees may adopt
By-Laws not inconsistent with this Declaration of Trust
containing provisions relating to the business of the Trust, the
conduct of its affairs, its rights or powers and the rights or
powers of its Shareholders, Trustees, officers, employees and
other agents and may amend and repeal them to the extent that
such By-Laws do not reserve that right to the Shareholders; fill
vacancies in their number, including vacancies resulting from
increases in their number, unless a vote of the Trust's
Shareholders is required to fill such vacancies pursuant to the
1940 Act; elect and remove such officers and appoint and
terminate such agents as they consider appropriate; appoint from
their own number, and terminate, any one or more committees
consisting of two or more Trustees, including an executive
committee which may, when the Trustees are not in session,
exercise some or all of the powers and authority of the Trustees
as the Trustees may determine; appoint an advisory board, the
members of which shall not be Trustees and need not be
Shareholders; employ one or more investment advisers or managers
as provided in Section 6 of this Article IV; employ one or more
custodians of the assets of the Trust and authorize such
custodians to employ subcustodians and to deposit all or any part
of such assets in a system or systems for the central handling of
securities; retain a transfer agent or a Shareholder services
agent, or both; provide for the distribution of Shares by the
Trust, through one or more principal underwriters or otherwise;
-9-
<PAGE> 10
set record dates for the determination of Shareholders with
respect to various matters; and in general delegate such
authority as they consider desirable to any officer of the Trust,
to any committee of the Trustees and to any agent or employee of
the Trust or to any such custodian or underwriter.
In furtherance of and not in limitation of the foregoing,
the Trustees shall have power and authority:
(a) To invest and reinvest in, to buy or otherwise acquire,
to hold, for investment or otherwise, to sell or otherwise
dispose of, to lend or to pledge, to trade in or deal in
securities or interests of all kinds, however evidenced, or
obligations of all kinds, however evidenced, or rights, warrants,
or contracts to acquire such securities, interests, or
obligations, of any private or public company, corporation,
association, general or limited partnership, trust or other
enterprise or organization, foreign or domestic, or issued or
guaranteed by any national or state government, foreign or
domestic, or their agencies, instrumentalities or subdivisions
(including but not limited to, bonds, debentures, bills, time
notes and all other evidences of indebtedness); negotiable or
non-negotiable instruments; any and all futures contracts;
government securities and money market instruments (including but
not limited to, bank certificates of deposit, finance paper,
commercial paper, bankers acceptances, and all kinds of
repurchase agreements);
(b) To invest and reinvest in, to buy or otherwise acquire,
to hold, for investment or otherwise, to sell or otherwise
dispose of foreign currencies, and funds and exchanges, and make
deposits in banks, savings banks, trust companies, and savings
and loan associations, foreign or domestic;
(c) To acquire (by purchase, lease or otherwise) and to
hold, use, maintain, develop, and dispose of (by sale or
otherwise) any property, real or personal, and any interest
therein;
(d) To sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of the Trust.
(e) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or property;
and to execute and deliver proxies or powers of attorney to such
person or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with relation to
securities or property as the Trustees shall deem proper;
(f) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;
-10-
<PAGE> 11
(g) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust
or in the name of a custodian, subcustodian or other depositary
or a nominee or nominees or otherwise;
(h) To allocate assets, liabilities and expenses of the
Trust to a particular series of Shares or to apportion the same
among two or more series, provided that any liabilities or
expenses incurred by a particular series shall be payable solely
out of the assets of that series;
(i) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or
issuer, any security or property of which is or was held in the
Trust; to consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or issuer, and to pay calls
or subscriptions with respect to any security held in the Trust;
(j) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in that
connection to deposit any security with, or transfer any security
to, any such committee, depositary or trustee, and to delegate to
them such power and authority with relation to any security
(whether or not so deposited or transferred) as the Trustees
shall deem proper, and to agree to pay, and to pay, such portion
of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper;
(k) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;
(l) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(m) To borrow funds;
(n) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof;
and to mortgage and pledge the Trust property or any part thereof
to secure any of or all such obligations;
(o) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of
distributions and principal on its portfolio investments, and
insurance policies insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers or managers, principal
underwriters, or independent contractors of the Trust
-11-
<PAGE> 12
individually against all claims and liabilities of every nature
arising by reason of holding, being or having held any such
office or position, or by reason of any action alleged to have
been taken or omitted by any such person as Shareholder, Trustee,
officer, employee, agent, investment adviser or manager,
principal underwriter, or independent contractor, including any
action taken or omitted that may be determined to constitute
negligence, whether or not the Trust would have the power to
indemnify such person against such liability; and
(p) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry
out pension, profit-sharing, share bonus, share purchase,
savings, thrift and other retirement, incentive and benefit
plans, trusts and provisions, including the purchasing of life
insurance and annuity contracts as a means of providing such
retirement and other benefits, for any or all of the Trustees,
officers, employees and agents of the Trust.
The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
trustees of common law trusts. Except as otherwise provided
herein or from time to time in the By-Laws, any action to be
taken by the Trustees may be taken by a majority of the Trustees
present at a meeting of Trustees (if a quorum by present), within
or without Massachusetts, including any meeting held by means of
a conference telephone or other communications equipment by means
of which all persons participating in the meeting can communicate
with each other simultaneously and participation by such means
shall constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.
Payment of Expenses, Allocation of Liabilities
----------------------------------------------
Section 3. The Trustees are authorized to pay or to cause
to be paid out of the principal or income of the Trust, or partly
out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the
management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of
the Trust's officers, employees, investment adviser or manager,
principal underwriter, auditor, counsel, custodian, transfer
agent, shareholder servicing agent, and such other agents or
independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.
The assets of a particular series of Shares shall be charged
with the liabilities (including, in the discretion of the
Trustees or their delegate, accrued expenses and reserves)
incurred in respect of such series (but not with liabilities
-12-
<PAGE> 13
incurred in respect of any other series) and such series shall
also be charged with its share of any other liabilities. The
determination of the Trustees shall be final and conclusive as to
the amount of liabilities to be charged to one or more particular
series. The Trustees may delegate from time to time the power to
make such allocation to one or more Trustees or to an agent of
the Trust appointed for such purpose. The liabilities with which
a series is so charged are herein referred to as the "liabilities
of" such series.
Section 4. The Trustees shall have the power, as frequently
as they may determine, to cause each Shareholder to pay directly,
in advance or arrears, for charges for the Trust's custodian or
transfer or shareholder service or similar agent, an amount fixed
from time to time by the Trustees, by setting off such charges
due from such Shareholder from declared but unpaid dividends owed
such Shareholder and/or by reducing the number of Shares in the
account of such Shareholder by that number of full and/or
fractional Shares which represents the outstanding amount of such
charges due from such Shareholder.
Ownership of Assets of the Trust
--------------------------------
Section 5. Title to all of the assets of each series of the
Trust and of the Trust shall at all times be considered as vested
in the Trustees.
Advisory, Management and Distribution
-------------------------------------
Section 6. Subject to a favorable vote of a majority of the
outstanding voting securities of a series of the Trust, the
Trustees may on behalf of such series, at any time and from time
to time, contract for exclusive or nonexclusive advisory and/or
management services for such series with a corporation, trust,
association or other organization, every such contract to comply
with such requirements and restrictions as may be set forth in
the By-Laws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of such series shall be held
uninvested and to make changes in such series' investments. The
Trustees may also, at any time and from time to time, contract
with a corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or principal
underwriter for the Shares, every such contract to comply with
such requirements and restrictions as may be set forth in the
By-Laws; and any such contract may contain such other terms
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<PAGE> 14
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine.
The fact that:
(a) any of the Shareholders, Trustees or officers of
the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, advisor, principal underwriter,
or distributor or agent of or for any corporation, trust,
association, or other organization, or of or for any parent
or affiliate of any organization, with which an advisory or
management or principal underwriter's or distributor's
contract, or transfer, shareholder services or other agency
contract may have been or may hereafter be made, or that any
such organization, or any parent or affiliate thereof, is a
Shareholder or has an interest in the Trust, or that
(b) any corporation, trust, association or other
organization with which an advisory or management or
principal underwriter's or distributor's contract, or
transfer, shareholder services or other agency contract may
have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, shareholder services or
other agency contract with one or more other corporations,
trusts, associations, or other organizations, or has other
businesses or interests
shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same or create any liability or accountability
to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
----------------------------------------
Voting Powers
-------------
Section 1. The Shareholders shall have power to vote only:
(a) for the election or removal of Trustees as provided in
Article IV, Section 1; (b) with respect to any investment advisor
or manager as provided in Article IV, Section 6; (c) with respect
to any termination or reorganization of the Trust or any series
thereof to the extent and as provided in Article IX, Section 1;
(d) with respect to any amendment of this Declaration of Trust to
the extent and as provided in Article IX, Section 4; (e) to the
same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or
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<PAGE> 15
claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or the Shareholders;
and (f) with respect to such additional matters relating to the
Trust as may be required by law, the 1940 Act, this Declaration
of Trust, the By-Laws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency) or
any state, or as the Trustees may consider necessary or
desirable.
Each whole Share shall be entitled to one vote as to any
matter on which it is entitled to vote and each fractional Share
shall be entitled to a proportionate fractional vote. Notwith-
standing any other provision of the Declaration of Trust, on any
matter submitted to a vote of Shareholders all Shares of the
Trust then entitled to vote shall be voted by individual series
and not in the aggregate, except (a) when required by the 1940
Act, Shares shall be voted in the aggregate and not by individual
series; and (b) when the Trustees have determined that the matter
affects only the interests of one or more series, then only
Shareholders of such series shall be entitled to vote thereon.
There shall be no cumulative voting in the election of Trustees.
Shares may be voted in person or by proxy.
A proxy with respect to Shares held in the name of two or
more persons shall be valid if executed by any one of them unless
at or prior to the exercise of the proxy the Trust receives a
specific written notice to the contrary from any one of them. A
proxy purporting to be executed by or on behalf of a Shareholder
shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the
challenger.
Until Shares are issued, the Trustees may exercise all
rights of Shareholders and may take any action required by law,
this Declaration of Trust or the By-Laws to be taken by
Shareholders.
Shareholder Meetings
--------------------
Section 2. Meetings of Shareholders (including meetings
involving only one or more but less than all series) may be
called and held from time to time for the purpose of taking
action upon any matter requiring the vote or authority of the
Shareholders as herein provided or upon any other matter deemed
by the Trustees to be necessary or desirable. Such meetings
shall be held at the principal office of the Trust as set forth
in the By-Laws of the Trust, or at any such other place within
the United States as may be designated in the call thereof, which
call shall be made by the Trustees or the President of the Trust.
Meetings of Shareholders may be called by the Trustees or such
other person or persons as may be specified in the By-Laws upon
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<PAGE> 16
written application by Shareholders holding at least twenty-five
percent (25%) (or ten percent (10%) if the purpose of the meeting
is to determine if a Trustee is to be removed from office) of the
Shares then outstanding of all series and classes entitled to
vote at such meeting requesting a meeting be called for a purpose
requiring action by the Shareholders as provided herein or in the
By-Laws which purpose shall be specified in any such written
application.
Shareholders shall be entitled to at least seven days'
written notice of any meeting of the Shareholders.
Quorum and Required Vote
------------------------
Section 3. The presence at a meeting of Shareholders in
person or by proxy of Shareholders entitled to vote at least
thirty percent (30%) of all votes entitled to be cast at the
meeting of each series or class entitled to vote as a series
shall be a quorum for the transaction of business at a
Shareholders' meeting, except that where any provision of law or
of this Declaration of Trust permits or requires that the holders
of Shares shall vote in the aggregate and not as a series, then
the presence in person or by proxy of Shareholders entitled to
vote at least thirty percent (30%) of all votes entitled to be
cast at the meeting (without regard to series) shall constitute a
quorum. Any lesser number, however, shall be sufficient for
adjournments. Any adjourned session or sessions may be held
within a reasonable time after the date set for the original
meeting without the necessity of further notice.
Except when a larger vote is required by any provisions of
the 1940 Act, this Declaration of Trust or the By-Laws, a
majority of the Shares of each series voted on the matter shall
decide that matter insofar as that series is concerned, provided
that where any provision of law or of this Declaration of Trust
permits or requires that the holders of Shares vote in the
aggregate and not as a series, then a majority of the Shares
voted on any matter (without regard to series) shall decide such
matter and a plurality shall elect a Trustee.
Action by Written Consent
-------------------------
Section 4. Any action taken by Shareholders may be taken
without a meeting if Shareholders entitled to vote more than
fifty percent (50%) of the votes entitled to be cast on the
matter of each series or, where any provision of law or of this
Declaration of Trust permits or requires that the holders of
Shares vote in the aggregate and not as a series, if Shareholders
entitled to vote more than fifty percent (50%) of the votes
entitled to be cast thereon (without regard to series) (or in
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<PAGE> 17
either case such larger vote as shall be required by any
provision of this Declaration of Trust or the By-Laws) consent to
the action in writing and such written consents are filed with
the records of the meetings of Shareholders. Such consent shall
be treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
---------------------
Section 5. The By-Laws may include further provisions for
Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE VI
Distributions, Redemptions and Repurchases,
and Determination of Net Asset Value
------------------------------------
Distributions
-------------
Section 1. The Trustees may in their sole discretion from
time to time distribute to the Shareholders of any series such
income and gains, accrued or realized, as the Trustees may
determine, after providing for actual and accrued expenses and
liabilities of such series (including such reserves as the
Trustees may establish) determined in accordance with this
Declaration of Trust and good accounting practices. The Trustees
shall have full discretion to determine which items shall be
treated as income and which items as capital and their
determination shall be binding upon the Shareholders.
Distributions to any series, if any be made, shall be in Shares
of such series, in cash or otherwise and on a date or dates
determined by the Trustees. At any time and from time to time in
their discretion, the Trustees may distribute to the Shareholders
of any series as of a record date or dates determined by the
Trustees, in Shares of such series, in cash or otherwise, all or
part of any gains realized on the sale or disposition of property
of the series or otherwise, or all or part of any other principal
of the Trust attributable to the series. Each distribution
pursuant to this Section 1 shall be made ratably according to the
number of Shares of the series held by the several Shareholders
on the applicable record date thereof, provided that
distributions from assets of a series may only be made to the
holders of the Shares of such series and provided that no
distributions need be made on Shares purchased pursuant to orders
received, or for which payment is made, after such time or times
as the Trustees may determine. Any distribution paid in Shares
will be paid at the net asset value thereof as determined in
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<PAGE> 18
accordance with this Declaration of Trust. The Trustees have the
power, in their discretion, to distribute for any year amounts
sufficient to enable the Trust to qualify as a "regulated
investment company" under the Internal Revenue Code of 1954 as
amended (or any successor thereto) to avoid any liability for
federal income tax in respect of that year.
Redemptions and Repurchases
---------------------------
Section 2. Any holder of Shares of the Trust may, by
presentation of a request in proper form, together with his
certificates, if any, for such Shares, in proper form for
transfer to the Trust or duly authorized agent of the Trust,
request redemption of his shares for the net asset value thereof
determined and computed in accordance with the provisions of this
Section 2 and the provisions of Section 6 of this Article VI.
Upon receipt by the Trust or its duly authorized agent, as
the case may be, of such a request for redemption of Shares in
proper form, such Shares shall be redeemed at the net asset value
per share of the particular series next determined after such
request is received or determined as of such other time fixed by
the Trustees as may be permitted or required by the 1940 Act.
The criteria for determining what constitutes a request for
redemption in proper form and the time of receipt of such request
shall be fixed by the Trustees.
The obligation of the Trust to redeem its Shares of each
series as set forth above in this Section 2 shall be subject to
the condition that such obligation may be suspended by the Trust
by or under authority of the Trustees during any period or
periods when and to the extent permissible under the 1940 Act.
If there is such a suspension, any Shareholder may withdraw any
request for redemption which has been received by the Trust
during any such period and the applicable net asset value with
respect to which would but for such suspension be calculated as
of a time during such period. Upon such withdrawal, the Trust
shall return to the Shareholder the certificates therefor, if
any.
The Trust may also purchase, repurchase or redeem Shares in
accordance with such other methods, upon such other terms and
subject to such other conditions as the Trustee may from time to
time authorize at a price not exceeding the net asset value of
such Shares in effect when the purchase or repurchase or any
contract to purchase or repurchase is made. Shares of any series
redeemed or repurchased by the Trust hereunder shall be cancelled
upon such redemption or repurchase without further action by the
Trust or the Trustees and the number of issued and outstanding
Shares of such series shall thereupon by reduced by such amount.
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<PAGE> 19
Payment for Shares Redeemed
---------------------------
Section 3. Payment of the redemption price for Shares
redeemed pursuant to this Article VI shall be made by the Trust
or its duly authorized agent after receipt by the Trust or its
duly authorized agent of a request for redemption in proper form
(together with any certificates for such Shares as provided in
Section 2 above) in accordance with procedures and subject to
conditions prescribed by the Trustees; provided, however, that
payment may be postponed during the period in which the
redemption of Shares is suspended under Section 2 above. Subject
to any generally applicable limitation imposed by the Trustees,
any payment on redemption, purchase or repurchase by the Trust of
Shares may, if authorized by the Trustees, be made wholly or
partly in kind, instead of in cash. Such payment in kind shall
be made by distributing securities or other property,
constituting, in the opinion of the Trustees, a fair
representation of the various types of securities and other
property then held by the series of Shares being redeemed,
purchased or repurchased (but not necessarily involving a portion
of each of the series' holdings) and taken at their value used in
determining the net asset value of the Shares in respect of which
payment is made.
Redemptions at the Option of the Trust
--------------------------------------
Section 4. The Trust shall have the right at its option and
at any time and from time to time to redeem Shares of any
Shareholder at the net asset value thereof as determined in
accordance with Section 6 of this Article VI, if at such time
such Shareholder owns fewer Shares of a series than, or Shares of
a series having an aggregate net asset value of less than, an
amount determined from time to time by the Trustees. Any such
redemption at the option of the Trust shall be made in accordance
with such other criteria and procedures for determining the
Shares to be redeemed, the redemption date and the means of
effecting such redemption as the Trustees may from time to time
authorize.
Additional Provisions Relating to Dividends, Redemptions and
------------------------------------------------------------
Repurchases
-----------
Section 5. The completion of redemption, purchase or
repurchase of Shares shall constitute a full discharge of the
Trust and the Trustees with respect to such Shares. No dividend
or distribution (including, without limitation, any distribution
paid upon termination of the Trust or of any series) with respect
to, nor any redemption or repurchase of, the Shares of any series
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<PAGE> 20
shall be effected by the Trust other than from the assets of such
series.
Determination of Net Asset Value
--------------------------------
Section 6. The term "net asset value" of each Share of a
series as of any particular time shall be the quotient obtained
by dividing the value, as at such time, of the net assets of such
series (i.e., the value of the assets of such series less the
liabilities of such series, exclusive of liabilities represented
by the Shares of such series) by the total number of Shares of
such series outstanding at such time, all determined and computed
in accordance with the Trust's current prospectus.
The Trustees, or any officer, or officers or agent of the
Trust designated for the purpose by the Trustees shall determine
the net asset value of the Shares of each series, and the
Trustees shall fix the time or times as of which the net asset
value of the Shares of each series shall be determined and shall
fix the periods during which any such net asset value shall be
effective as to sales, redemptions and repurchases of, and other
transactions in, the Shares of such series, except as such times
and periods for any such transaction may be fixed by other
provisions of this Declaration of Trust or by the By-Laws.
Determinations in accordance with this Section 6 made in
good faith shall be binding on all parties concerned.
How Long Shares are Outstanding
-------------------------------
Section 7. Shares of the Trust surrendered to the Trust for
redemption by it pursuant to the provisions of Section 2 of this
Article VI shall be deemed to be outstanding until the redemption
price thereof is determined pursuant to this Article VI and,
thereupon and until paid, the redemption price thereof shall be
deemed to be a liability of the Trust. Shares of the Trust
purchased by the Trust in the open market shall be deemed to be
outstanding until confirmation of purchase thereof by the Trust
and, thereupon and until paid, the purchase price thereof shall
be deemed to be a liability of the Trust. Shares of the Trust
redeemed by the Trust pursuant to Section 4 of this Article VI
shall be deemed to be outstanding until said Shares are deemed to
be redeemed in accordance with procedures adopted by the Trustees
pursuant to said Section 4.
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<PAGE> 21
ARTICLE VII
Compensation and Limitation of Liability of Compensation
-------------------------------------------------------
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust if the rate thereof is
prescribed by such Trustees. Nothing herein shall in any way
prevent the employment of any Trustee for advisory, management,
legal, accounting, investment banking or other services and
payment for the same by the Trust, it being recognized that such
employment may result in such Trustee being considered an
Affiliated Person or an Interested Person.
Limitation of Liability
-----------------------
Section 2. The Trustees shall not be responsible or liable
in any event for any neglect or wrongdoing of any officer, agent,
employee, investment advisor or manager, principal underwriter or
custodian, nor shall any Trustee be responsible for the act or
omission of any other Trustee. Nothing in this Declaration of
Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate, Share
or undertaking and every other act or thing whatsoever executed
or done by or on behalf of the Trust or the Trustees or any of
them in connection with the Trust shall be conclusively deemed to
have been executed or done only in or with respect to their or
his capacity as Trustees or Trustee and neither such Trustees or
Trustee nor the Shareholders shall be personally liable thereon.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officers or
officer shall give notice that this Declaration of Trust is on
file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or made
by or on behalf of the Trust by them as Trustees or Trustee or as
officers or officer and not individually and that the obligations
of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets
and property of the Trust or a particular series of Shares, and
may contain such further recital as he or they may deem
appropriate, but the omission thereof shall not operate to bind
any Trustees or Trustee or officers or officer or Shareholders or
Shareholder individually.
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<PAGE> 22
All persons extending credit to, contracting with or having
any claim against the Trust or a particular series of Shares
shall look only to the assets of the Trust or the assets of that
particular series of Shares, as the case may be, for payment
under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, shall be
personally liable therefor.
Trustees' Good Faith Action, Expert Advice, No Bond or Surety
-------------------------------------------------------------
Section 3. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested.
A Trustee shall be liable only for his own willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes
of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this
Declaration of Trust and their duties as Trustees hereunder, and
shall be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. In
discharging their duties, the Trustees, when acting in good
faith, shall be entitled to rely upon the books of account of the
Trust and upon written reports made to the Trustees by any
officer appointed by them, any independent public accountant and
(with respect to the subject matter of the contract involved) any
officer, partner or responsible employee of any other party to
any contract entered into pursuant to Section 2 of Article IV.
The Trustees shall not be required to give any bond as such, nor
any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
------------------------------------------------
Section 4. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the
Trust or upon its order.
ARTICLE VIII
Indemnification
---------------
Subject to the exceptions and limitations contained in this
Article, every person who is, or has been, a Trustee or officer
of the Trust (including persons who serve at the request of the
Trust as directors, officers or trustees of another organization
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<PAGE> 23
in which the Trust has an interest as a shareholder, creditor or
otherwise) hereinafter referred to as a "Covered Person", shall
be indemnified by the Trust to the fullest extent permitted by
law against liability and against all expenses reasonably
incurred or paid by him in connection with any claim, action,
suit or proceeding in which he becomes involved as a party or
otherwise by virtue of his being or having been such a Trustee,
director or officer and against amounts paid or incurred by him
in settlement thereof.
No indemnification shall be provided hereunder to a Covered
Person:
(a) against any liability to the Trust or its
Shareholders by reason of a final adjudication by the court
or other body before which the proceeding was brought that
he engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
the conduct of his office;
(b) with respect to any matter as to which he shall
have been finally adjudicated not to have acted in good
faith in the reasonable belief that his action was in the
best interest of the Trust; or
(c) in the event of a settlement or other disposition
not involving a final adjudication (as provided in paragraph
(a) or (b)) and resulting in a payment by a Covered Person,
unless there has been either a determination that such
Covered Person did not engage in willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office by the court or other
body approving the settlement or other disposition or a
reasonable determination, based on a review of readily
available facts (as opposed to a full trial-type inquiry)
that he did not engage in such conduct:
(i) by a vote of a majority of the Disinterested
Trustees acting on the matter (provided that a majority
of the Disinterested Trustees then in office act on the
matter); or
(ii) by written opinion of independent legal
counsel.
The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable,
shall not affect any other rights to which any Covered Person may
now or hereafter be entitled, shall continue as to a person who
has ceased to be such a Covered Person and shall inure to the
benefit of the heirs, executors and administrators of such a
person. Nothing contained herein shall affect any rights to
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<PAGE> 24
indemnification to which Trust personnel other than Covered
Persons may be entitled by contract or otherwise under law.
Expenses of preparation and presentation of a defense to any
claim, action, suit or proceeding subject to a claim for
indemnification under this Article shall be advanced by the Trust
prior to final disposition thereof upon receipt of an undertaking
by or on behalf of the recipient to repay such amount if it is
ultimately determined that he is not entitled to indemnification
under this Article, provided that either:
(a) such undertaking is secured by a surety bond or
some other appropriate security or the Trust shall be
insured against losses arising out of any such advances; or
(b) a majority of the Disinterested Trustees acting on
the matter (provided that a majority of the Disinterested
Trustees then in office act on the matter) or independent
legal counsel in a written opinion shall determine, based
upon a review of the readily available facts (as opposed to
a full trial-type inquiry), that there is reason to believe
that the recipient ultimately will be found entitled to
indemnification.
As used in this Article, a "Disinterested Trustee" is one
(a) who is not an "interested person" of the Trust, as defined in
the 1940 Act (including anyone who has been exempted from being
an "interested person" by any rule, regulation or order of the
Commission), and (b) against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on
the same or similar grounds is then or has been pending.
As used in this Article, the words "claim", "action", "suit"
or "proceeding" shall apply to all claims, actions, suits or
proceedings (civil, criminal or other, including appeals), actual
or threatened; and the words "liability" and "expenses" shall
include without limitation, attorneys' fees, cost, judgments,
amounts paid in settlement, fines, penalties and other
liabilities.
In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his or her being or
having been a Shareholder and not because of his or her acts or
omissions or for some other reason, the Shareholder or former
Shareholder (or his or her heirs, executors, administrators or
other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all
loss and expense arising from such liability but only out of the
assets of the particular series of Shares of which he or she is
or was a Shareholder; provided, however, there shall be no
liability or obligation of the Trust arising hereunder to
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<PAGE> 25
reimburse any Shareholder for taxes paid by reason of such
Shareholder's ownership of Shares or for losses suffered by
reason of any changes in value of any Trust assets.
ARTICLE IX
Miscellaneous
-------------
Duration, Termination and Reorganization of Trust
-------------------------------------------------
Section 1. Unless terminated as provided herein, the Trust
shall continue without limitation of time. The Trust may be
terminated at any time by the Trustees by written notice to the
Shareholders without a vote of the Shareholders of the Trust or
by the vote of the Shareholders entitled to vote more than fifty
percent (50%) of the votes of each series entitled to be cast on
the matter. Any series of Shares may be terminated at any time
by the Trustees by written notice to the Shareholders of such
series without a vote of the Shareholders of such series or by
the vote of the Shareholders of such series entitled to vote more
than fifty percent (50%) of the votes entitled to be cast on the
matter.
Upon termination of the Trust or of any one or more series
of Shares, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or
anticipated, of the particular series as may be determined by the
Trustees, the Trust shall in accordance with such procedures as
the Trustees consider appropriate reduce to the extent necessary
the remaining assets of the particular series to distributable
form in cash or other securities, or any combination thereof, and
distribute the proceeds to the Shareholders of the series
involved, ratably according the number of Shares of such series
held by the several Shareholders of such series or class on the
date of termination.
At any time by the affirmative vote of the Shareholders of
the affected series entitled to vote more than fifty percent
(50%) of the votes entitled to be cast on the matter, the
Trustees may sell, convey and transfer the assets of the Trust,
or the assets belonging to any one or more series, to another
trust, partnership, association or corporation organized under
the laws of any state of the United States, or to the Trust to be
held as assets belonging to another series of the Trust, in
exchange for cash, shares or other securities (including, in the
case of a transfer to another series of the Trust, Shares of such
other series) with such transfer being made subject to, or with
the assumption by the transferee of, the liabilities belonging to
each series the assets of which are so distributed. Following
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<PAGE> 26
other securities (giving due effect to the assets and liabilities
belonging to and any other differences among the various series
the assets belonging to which have so been transferred) among the
Shareholders of the series the assets belonging to which have
been so transferred; and if all of the assets of the Trust have
been so distributed, the Trust shall be terminated.
Filing of Copies, References, Headings
--------------------------------------
Section 2. The original or a copy of this instrument and of
each amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the
Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a
certificate by any officer of the Trust as to whether or not any
such amendments have been made and as to any matters in
connection with the Trust hereunder; and, with the same effect as
if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein",
"hereof", and "hereunder", shall be deemed to refer to this
instrument as amended from time to time. Headings are placed
herein for convenience of reference only and shall not be taken
as a part hereof or control or affect the meaning, construction
or effect of this instrument. This instrument may be executed in
any number of counterparts each of which shall be deemed an
original.
Applicable Law
--------------
Section 3. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to
be governed by and construed and administered according to the
laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
Amendments
----------
Section 4. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then
Trustees when authorized so to do by vote of Shareholders holding
more than fifty percent (50%) of the Shares of each series
-26-
<PAGE> 27
entitled to vote, except that an amendment which shall affect the
holders of one or more series of Shares but not the holders of
all outstanding series shall be authorized by vote of the
Shareholders holding more than fifty percent (50%) of the Shares
entitled to vote of each series affected and no vote of
Shareholders of a series not affected shall be required.
Amendments having the purpose of changing the name of the Trust
or any series or of supplying any omission, curing any ambiguity
or curing, correcting or supplementing any provision which is
defective or inconsistent with the 1940 Act or with the
requirements of the Internal Revenue Code and the regulations
thereunder for the Trust's obtaining the most favorable treatment
thereunder available to regulated investment companies shall not
require authorization by Shareholder vote.
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal for himself and his assigns, as of the day and year
first above written.
/s/ Philip J. Collora
------------------------------
(SEAL) Philip J. Collora, Trustee
COMMONWEALTH OF MASSACHUSETTS
County of Suffolk, ss.
Then personally appeared the above-named Philip J. Collora
who acknowledged the foregoing instrument to be his free act and
deed, before me this 25th day of February, 1987.
/s/ Judith J. Morrison
--------------------------------
Notary Public
My Commission Expires: Nov. 2, 1990
---------------
-27-
<PAGE> 1
EXHIBIT 99.B2.
BY-LAWS OF
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
Section 1. Agreement and Declaration of
----------------------------------------
Trust and Principal Office
--------------------------
1.1 Agreement and Declaration of Trust. These By-Laws shall be
subject to the Agreement and Declaration of Trust, as from time
to time in effect (the "Declaration of Trust"), of Tax-Exempt
California Money Market Fund, the Massachusetts business trust
established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust; Resident Agent. The
principal office of the Trust shall be located in Chicago,
Illinois. Its resident agent in Massachusetts shall be CT
Corporation System, 2 Oliver Street, Boston, Massachusetts or
such other person as the Trustees may from time to time select.
Section 2. Shareholders
------------------------
2.1 Shareholder Meetings. Meetings of the shareholders may be
called at any time by the Trustees, by the President or, if the
Trustees and the President shall fail to call any meeting of
shareholders for a period of 30 days after written application of
one or more shareholders who hold at least 25% of all shares
issued and outstanding and entitled to vote at the meeting (or
10% if the purpose of the meeting is to determine if a trustee
shall be removed from office), then such shareholders may call
such meeting. Each call of a meeting shall state the place,
date, hour and purposes of the meeting.
2.2 Place of Meetings. All meetings of the shareholders shall
be held at the principal office of the Trust, or, to the extent
permitted by the Declaration of Trust, at such other place within
the United States as shall be designated by the Trustees or the
President of the Trust.
2.3 Notice of Meetings. A written notice of each meeting of
shareholders, stating the place, date and hour and the purposes
of the meeting, shall be given at least seven days before the
meeting to each shareholder entitled to vote thereat by leaving
such notice with him or at his residence or usual place of
business or by mailing it, postage prepaid, and addressed to such
shareholder at his address as it appears in the records of the
Trust. Such notice shall be given by the Secretary or an
<PAGE> 2
Assistant Secretary or by an officer designated by the Trustees.
No notice of any meeting of shareholders need by given to a
shareholder if a written waiver of notice, executed before or
after the meeting by such shareholder or his attorney thereunto
duly authorized, is filed with the records of the meeting.
2.4 Ballots. No ballot shall be required for any election
unless requested by a shareholder present or represented at the
meeting and entitled to vote in the election.
2.5 Proxies and Voting. Shareholders entitled to vote may vote
either in person or by proxy in writing dated not more than six
months before the meeting named therein, which proxies shall be
filed with the Secretary or other person responsible to record
the proceedings of the meeting before being voted. Unless
otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of
such meeting. At all meetings of shareholders, unless the voting
is conducted by inspectors, all questions relating to the
qualification of voters, the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman
of the meeting.
Section 3. Trustees
--------------------
3.1 Committees and Advisory Board. The Trustees may appoint
from their number an executive committee and other committees.
Any such committee may be abolished and reconstituted at any time
and from time to time by the Trustees. Except as the Trustees
may otherwise determine, any such committee may make rules for
the conduct of its business. The Trustees may appoint an
advisory board to consist of not less than two nor more than five
members. The members of the advisory board shall be compensated
in such manner as the Trustees may determine and shall confer
with and advise the Trustees regarding the investments and other
affairs of the Trust. Each member of the advisory board shall
hold office until the first meeting of the Trustees following the
meeting of the shareholders, if any, next following his
appointment and until his successor is appointed and qualified,
or until he sooner dies, resigns, is removed, or becomes
disqualified, or until the advisory board is sooner abolished by
the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be
held without call or notice at such places and at such times as
the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees. A regular
meeting of the Trustees may be held without call or notice
2
<PAGE> 3
immediately after and at the same place as any meeting of the
shareholders.
3.3 Special Meetings. Special meetings of the Trustees may be
held at any time and at any place designated in the call of the
meeting, when called by the Chairman of the Board or by two or
more Trustees, sufficient notice thereof being given to each
Trustee by the Secretary or an Assistant Secretary or by the
officer or one of the Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send
notice by mail at least three days or by telegram at least
twenty-four hours before the meeting addressed to the Trustee at
his or her usual or last known business or residence address or
to give notice to him or her in person or by telephone at least
twenty-four hours before the meeting. Notice of a meeting need
not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with
the records of the meeting, or to any Trustee who attends the
meeting without protesting prior thereto or at its commencement
the lack of notice to him or her. Neither notice of a meeting
nor a waiver of a notice need specify the purposes of the
meeting.
3.5 Quorum. At any meeting of the Trustees, one-third of the
Trustees then in office shall constitute a quorum; provided,
however, a quorum (unless the Board of Trustees consists of two
or fewer persons) shall not be less than two. Any meeting may be
adjourned from time to time by a majority of the votes cast upon
the question, whether or not a quorum is present, and the meeting
may be held as adjourned without further notice.
Section 4. Officers and Agents
-------------------------------
4.1 Enumeration; Qualification. The officers of the Trust shall
be a President, a Treasurer, a Secretary and such other officers,
if any, as the Trustees from time to time may in their discretion
elect or appoint. The Trust may also have such agents, if any,
as the Trustees from time to time may in their discretion
appoint. Any officer may be but none need be a Trustee or
shareholder. Any two or more offices may be held by the same
person.
4.2 Powers. Subject to the other provisions of these By-Laws,
each officer shall have, in addition to the duties and powers
herein and in the Declaration of Trust set forth, such duties and
powers as are commonly incident to his or her office as if the
Trust were organized as a Massachusetts business corporation and
such other duties and powers as the Trustees may from time to
time designate.
3
<PAGE> 4
4.3 Election. The President, the Treasurer and the Secretary
shall be elected annually by the Trustees at their first meeting
in each calendar year or at such later meeting in such year as
the Trustees shall determine. Other officers or agents, if any,
may be elected or appointed by the Trustees at said meeting or at
any other time.
4.4 Tenure. The President, Treasurer and Secretary shall hold
office until the first meeting of Trustees in each calendar year
and until their respective successors are chosen and qualified,
or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified. Each other officer shall hold office
and each agent shall retain his or her authority at the pleasure
of the Trustees.
4.5 Chairman of the Board. The Chairman of the Board of
Trustees, if one is so appointed, shall be chosen from among the
Trustees and may hold office only so long as he continues to be a
Trustee. The Chairman of the Board, if any is so appointed,
shall preside at all meetings of the shareholders and of the
Trustees at which he is present; and shall have such other duties
and powers as specified herein and as may be assigned to him by
the Trustees.
4.6 President and Vice Presidents. The President shall be the
chief executive officer of the Trust. The President shall,
subject to the control of the Trustees, have general charge and
supervision of the Trust and shall perform such other duties and
have such other powers as the Trustees shall prescribe from time
to time. Any Vice President shall at the request or in the
absence or disability of the President exercise the powers of the
President and perform such other duties and have such other
powers as shall be designated from time to time by the Trustees.
4.7 Treasurer and Controller. The Treasurer shall be the chief
financial officer of the Trust and, subject to any arrangement
made by the Trustees with a bank or trust company or other
organization as custodian or transfer or shareholder services
agent, shall be in charge of its valuable papers and shall have
such other duties and powers as may be designated from time to
time by the Trustees or by the President. If at any time there
shall be no Controller, the Treasurer shall also be the chief
accounting officer of the Trust and shall have the duties and
power prescribed herein for the Controller. Any Assistant
Treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.
The Controller, if any be elected, shall be the chief accounting
officer of the Trust and shall be in charge of its books of
account and accounting records. The Controller shall be
responsible for preparation of financial statements of the Trust
4
<PAGE> 5
and shall have such other duties and powers as may be designated
from time to time by the Trustees or the President.
4.8 Secretary and Assistant Secretaries. The Secretary shall
record all proceedings of the shareholders and the Trustees in
books to be kept therefor, which books shall be kept at the
principal office of the Trust. In the absence of the Secretary
from any meeting of shareholders or Trustees, an Assistant
Secretary, or if there be none or if he or she is absent, a
temporary clerk chosen at the meeting shall record the
proceedings thereof in the aforesaid books.
Section 5. Resignations and Removals
-------------------------------------
Any Trustee may resign his trust or retire as a Trustee in
accordance with procedures set forth in the Declaration of Trust.
Any officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the Chairman of
the Board, the President or the Secretary or to a meeting of the
Trustees. The Trustees may remove any officer or advisory board
member elected or appointed by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the
extent expressly provided in a written agreement with the Trust,
no Trustee, officer, or advisory board member resigning, and no
officer or advisory board member removed, shall have any right to
any compensation for any period following his or her resignation
or removal, or any right to damages on account of such removal.
Section 6. Vacancies
---------------------
A vacancy in the office of Trustee shall be filled in accordance
with the Declaration of Trust. Vacancies resulting from the
death, resignation, incapacity or removal of any officer may be
filled by the Trustees. Each successor of any such officer shall
hold office for the unexpired term, and in the case of the
President, the Treasurer and the Secretary, until his or her
successor is chosen and qualified, or in each case until he or
she sooner dies, resigns, is removed or becomes disqualified.
Section 7. Shares of Beneficial Interest
-----------------------------------------
7.1 Share Certificates. No certificates certifying the
ownership of shares shall be issued except as the Trustees may
otherwise authorize. In the event that the Trustees authorize
the issuance of share certificates, subject to the provisions of
Section 7.3, each shareholder shall be entitled to a certificate
5
<PAGE> 6
stating the number of shares owned by him or her, in such form as
shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President
and by the Treasurer, Assistant Treasurer, Secretary or Assistant
Secretary. Such signatures may be facsimiles if the certificate
is signed by a transfer or shareholder services agent or by a
registrar, other than a Trustee, officer or employee of the
Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased
to be such officer before such certificate is issued, it may be
issued by the Trust with the same effect as if he or she were
such officer at the time of its issue.
In lieu of issuing certificates for shares, the Trustees or the
transfer or shareholder services agent may either issue receipts
therefor or may keep accounts upon the books of the Trust for the
record holders of such shares, who shall in either case be
deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
7.2 Loss of Certificates. In the case of the alleged loss or
destruction or the mutilation of a share certificate, a duplicate
certificate may be issued in place thereof, upon such terms as
the Trustees may prescribe.
7.3 Discontinuance of Issuance of Certificates. The Trustees
may at any time discontinue the issuance of share certificates
and may, by written notice to each shareholder, require the
surrender of share certificates to the Trust for cancellation.
Such surrender and cancellation shall not affect the ownership of
shares in the Trust.
Section 8. Record Date
-----------------------
The Trustees may fix in advance a time, which shall not be more
than 90 days before the date of any meeting of shareholders or
the date for the payment of any dividend or making of any other
distribution to shareholders, as the record date for determining
the shareholders having the right to notice and to vote at such
meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of
record on such record date shall have such right, notwithstanding
any transfer of shares on the books of the Trust after the record
date.
6
<PAGE> 7
Section 9. Seal
----------------
The seal of the Trust shall, subject to alteration by the
Trustees, consist of a flat-faced circular die with the word
"Massachusetts" together with the name of the Trust, cut or
engraved thereon; but, unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument, or
other paper executed and delivered by or on behalf of the Trust.
Section 10. Execution of Papers
--------------------------------
Except as the Trustees may generally or in particular cases
authorize the execution thereof in some other manner, all deeds,
leases, transfers, contracts, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the Trust shall
be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the President or by one of the
Vice Presidents or by the Treasurer or by whomsoever else shall
be designated for that purpose by the vote of the Trustees and
need not bear the seal of the Trust.
Section 11. Fiscal Year
------------------------
The fiscal year of the Trust shall end on such date in each year
as the Trustees shall from time to time determine.
Section 12. Amendments
-----------------------
These By-Laws may be amended or repealed, in whole or in part, by
a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such majority.
7
<PAGE> 1
EXHIBIT 99.B4
[Name]
is the owner of [number] shares
of beneficial interest in the above noted Fund (the "FUND"), of
the series and class, if any, specified, fully paid and
nonassessable, the said shares being issued and held subject to
the provisions of the Agreement and Declaration of Trust of the
Fund, and all amendments thereto, copies of which are on file
with the Secretary of The Commonwealth of Massachusetts. The
said owner by accepting this certificate agrees to and is bound
by all of the said provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by
attorney upon surrender of this certificate to the Fund properly
endorsed for transfer. This certificate is executed on behalf of
the Trustees of the Fund as Trustees and not individually and the
obligations hereof are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Fund or, if applicable, the
specified series of the Fund. The shares may be subject to a
contingent deferred sales charge. This certificate is not valid
unless countersigned by the Transfer Agent.
<PAGE> 1
EXHIBIT 99.B5
INVESTMENT MANAGEMENT AGREEMENT
AGREEMENT made this 4th day of January, 1996, by and between TAX-
EXEMPT CALIFORNIA MONEY MARKET FUND, a Massachusetts business
trust (the "Fund"), and KEMPER FINANCIAL SERVICES, INC., a
Delaware corporation (the "Adviser").
WHEREAS, the Fund is an open-end, diversified management
investment company registered under the Investment Company Act of
1940, the shares of beneficial interest ("Shares") of which are
registered under the Securities Act of 1933; and
WHEREAS, the Fund is authorized to issue Shares in separate
series with each such series representing the interests in a
separate portfolio of securities and other assets; and
WHEREAS, the Fund intends initially to offer Shares in one
portfolio, the Initial Portfolio, together with any other Fund
portfolios which may be established later and served by the
Adviser hereunder, being herein referred to collectively as the
"Portfolios" and individually referred to as a "Portfolio"; and
WHEREAS, the Fund desires at this time to retain the Adviser to
render investment advisory and management services to the Initial
Portfolio, and the 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 Fund hereby employs the Adviser to act as the investment
adviser for the Initial Portfolio and other Portfolios hereunder
and to manage the investment and reinvestment of the assets of
such Portfolio in accordance with the applicable investment
objectives and policies and limitations, and to administer the
affairs to the extent requested by and subject to the supervision
of the Board of Trustees of the Fund for the period and upon the
terms herein set forth. 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 Adviser accepts such employment and agrees during such period
to render such services, to furnish 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 Adviser
<PAGE> 2
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 in any way or otherwise be deemed an agent of the Fund.
It is understood and agreed that the Adviser, by separate
agreements with the Fund, may also serve the Fund in other
capacities.
2. In the event that the Fund establishes one or more
portfolios other than the Initial Portfolio with respect to which
it desires to retain the Adviser to render investment advisory
and management services hereunder, it shall notify the Adviser in
writing. If the Adviser is willing to render such services, it
shall notify the Fund in writing whereupon such portfolio or
portfolios shall become a Portfolio or Portfolios hereunder.
3. For the services and facilities described in Section 1, the
Fund will pay to the Adviser at the end of each calendar month,
an investment management fee computed at an annual rate of 0.22
of 1% of the first $500 million of average daily net assets of
the Portfolios, 0.20 of 1% of the next $500 million, .175 of 1%
of the next $1 billion, .16 of 1% of the next $1 billion and .15
of 1% of average daily net assets of the Portfolios over $3
billion. The fee as computed above shall be allocated as an
expense of each Portfolio based upon the relative daily net
assets of such Portfolios. 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 Adviser to the Fund under this Agreement
are not to be deemed exclusive, and the Adviser shall be free to
render similar services or other services to others so long as
its services hereunder are not impaired thereby.
5. In addition to the fee of the Adviser, the Fund shall assume
and pay any expenses for services rendered by a custodian for the
safekeeping of the Fund's securities or other property, for
keeping its books of account, for any other charges of the
custodian, and for calculating the net asset value of the Fund as
provided in the prospectus of the Fund. The Adviser shall not be
required to pay and the Fund shall assume and pay the charges and
expenses of its operations, including compensation of the
trustees (other than those affiliated with the Adviser), charges
and expenses of independent auditors, of legal counsel, of any
transfer or dividend disbursing agent, and of any registrar of
the Fund, costs of acquiring and disposing of portfolio
securities, interest, if any, on obligations incurred by the
Fund, costs of share certificates and of reports, membership dues
in the Investment Company Institute or any similar organization,
costs of reports and notices to shareholders, other like
miscellaneous expenses and all taxes and fees payable to federal,
-2-
<PAGE> 3
state or other governmental agencies on account of the
registration of securities issued by the Fund, filing of trust
documents or otherwise. The Fund shall not pay or incur any
obligation for any expenses for which the Fund intends to seek
reimbursement from the Adviser as herein provided without first
obtaining the written approval of the Adviser. The Adviser shall
arrange, if desired by the Fund, for officers or employees of the
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.
If expenses borne by the Fund for those Portfolios which the
Adviser manages in any fiscal year (including the Adviser's fee,
but excluding interest, taxes, fees incurred in acquiring and
disposing of portfolio securities, distribution services fees,
and, to the extent permitted, extraordinary expenses) exceed any
applicable limitation arising under state securities laws, the
Adviser will reduce its fee or reimburse the Fund for any excess
to the extent required by such state securities laws. The
expense limitation guarantee shall be allocated to each such
Portfolio upon a fee reduction or reimbursement based upon the
relative average daily net assets of each such Portfolio. If for
any month the expenses of the Fund properly chargeable to the
income account shall exceed 1/12 of the percentage of average net
assets allowable as expenses, the payment to the Adviser for that
month shall be reduced and if necessary the Adviser shall make a
refund payment to the Fund so that the total net expense will not
exceed such percentage. As of the end of the Fund's fiscal year,
however, the foregoing computations and payments shall be
readjusted so that the aggregate compensation payable to the
Adviser for the year is equal to the percentage set forth in
Section 3 hereof of the average net asset value as determined as
described herein throughout the fiscal year, diminished to the
extent necessary so that the total of the aforementioned expense
items of the Fund shall not exceed the expense limitation. The
aggregate of repayments, if any, by the Adviser to the Fund for
the year shall be the amount necessary to limit the said net
expense to said percentage in accordance with the foregoing.
The net asset value for each Portfolio shall be calculated in
accordance with the provisions of the Fund's prospectus or at
such other time or times as the trustees may determine in
accordance with the provisions of the Investment Company Act of
1940. On each day when net asset value is not calculated, the
net asset value of a share of a Portfolio shall be deemed to be
the net asset value of such a share as of the close of business
on the last day on which such calculation was made for the
purpose of the foregoing computations.
6. Subject to applicable statutes and regulations, it is
understood that trustees, officers or agents of the Fund are or
-3-
<PAGE> 4
may be interested in the Adviser as officers, directors, agents,
shareholders or otherwise, and that the officers, directors,
shareholders and agents of the Adviser may be interested in the
Fund otherwise than as a trustee, officer or agent.
7. The Adviser shall not be liable for any error of judgment or
of law or for any loss suffered by the Fund in connection with
the matters to which this Agreement relates, except loss
resulting from willful misfeasance, bad faith or gross negligence
on the part of the Adviser in the performance of its obligations
and duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
8. This Agreement shall become effective with respect to the
Initial Portfolio on the date hereof and shall remain in full
force until December 1, 1996, unless sooner terminated as
hereinafter provided. This Agreement shall continue in force
from year to year thereafter with respect to each Portfolio, but
only as long as such continuance is specifically approved for
each Portfolio 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 Portfolio, the Adviser may
continue to serve in such capacity for such Portfolio 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 and may be terminated at any time without the payment
of any penalty by the Fund or by the Adviser on sixty (60) days
written notice to the other party. The Fund may effect
termination with respect to any Portfolio by action of the Board
of Trustees or by vote of a majority of the outstanding voting
securities of such Portfolio.
This Agreement may be terminated with respect to any Portfolio at
any time without the payment of any penalty by the Board of
Trustees or by vote of a majority of the outstanding voting
securities of such Portfolio in the event that it shall have been
established by a court of competent jurisdiction that the Adviser
or any officer or director of the Adviser has taken any action
which results in a breach of the covenants of the 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
Adviser to receive payments on any unpaid balance of the
compensation described in Section 3 earned prior to such
termination.
-4-
<PAGE> 5
9. 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.
10. 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.
11. All parties hereto are expressly put on notice of the
Fund's Agreement and Declaration of Trust and all amendments
thereto, all of which are on file with the Secretary of The
Commonwealth of Massachusetts, and the limitation of shareholder
and trustee liability contained therein. This Agreement has been
executed by and on behalf of the Fund by its representatives as
such representatives and not individually, and the obligations of
the Fund hereunder are not binding upon any of the trustees,
officers, or shareholders of the Fund individually but are
binding upon only the assets and property of the Fund. With
respect to any claim by the Adviser for recovery of that portion
of the investment management fee (or any other liability of the
Fund arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or otherwise,
the Adviser shall have recourse solely against the assets of that
Portfolio to satisfy such claim and shall have no recourse
against the assets of any other Portfolio for such purpose.
-5-
<PAGE> 6
12. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 11 hereof which
shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of Illinois.
IN WITNESS WHEREOF, the Fund and the Adviser have caused this
Agreement to be executed as of the day and year first above
written.
TAX-EXEMPT CALIFORNIA
MONEY MARKET FUND
By: /s/ John E. Peters
--------------------------
Title: Vice President
-----------------------
ATTEST:
/s/ Philip J. Collora
----------------------------
Title: Secretary
----------------------
KEMPER FINANCIAL SERVICES, INC.
By: /s/ Patrick H. Dudasik
--------------------------
Title: Senior Vice President
-----------------------
ATTEST:
/s/ David F. Dierenfeldt
-----------------------------
Title: Assistant Secretary
-----------------------
-6-
<PAGE> 1
EXHIBIT 99.B6(a).
ADMINISTRATION, SHAREHOLDER SERVICES AND
DISTRIBUTION AGREEMENT
AGREEMENT made this 4th day of January, 1996, by and between TAX-
EXEMPT CALIFORNIA MONEY MARKET FUND, a Massachusetts business
trust (the "Fund"), and KEMPER DISTRIBUTORS, INC., a Delaware
corporation ("KDI").
In consideration of the mutual covenants hereinafter contained,
it is hereby agreed by and between the parties hereto as follows:
1. The Fund hereby appoints KDI to act as administrator,
distributor and principal underwriter for the distribution of
shares of beneficial interest (hereinafter called "shares") of
the Fund in jurisdictions wherein shares of the Fund may legally
be offered for sale; provided, however, that the Fund in its
absolute discretion may (a) issue or sell shares directly to
holders of shares of the Fund upon such terms and conditions and
for such consideration, if any, as it may determine, whether in
connection with the distribution of subscription or purchase
rights, the payment or reinvestment of dividends or
distributions, or otherwise; or (b) issue or sell shares at net
asset value to the shareholders of any other investment company,
for which KDI shall act as exclusive distributor, who wish to
exchange all or a portion of their investment in shares of such
other investment company for shares of the Fund.
KDI shall appoint various broker-dealers and other financial
services firms ("Firms") to provide a cash management service for
their clients through the Fund. The Firms shall provide such
office space and equipment, telephone facilities, personnel,
literature distribution, advertising and promotion as is
necessary or beneficial for providing information and services to
potential and existing shareholders of the Fund and to assist the
Fund's shareholder service agent in servicing accounts of the
Firm's clients who own Fund shares ("clients"). Such services
and assistance may include, but are not limited to, establishment
and maintenance of shareholder accounts and records, processing
purchase and redemption transactions, automatic investment in
Fund shares of client account cash balances, answering routine
client inquiries regarding the Fund, assistance to clients in
changing dividend options, account designations and addresses,
and such other services as the Fund or KDI may reasonably
request. KDI may also provide some of the above services for the
Fund directly.
KDI accepts such appointment and agrees during the term hereof to
render such services and to assume the obligations herein set
forth for the compensation herein provided. KDI shall for all
purposes herein provided be deemed to be an independent
<PAGE> 2
contractor and, unless otherwise expressly provided or
authorized, shall have no authority to act for or represent the
Fund in any way or otherwise be deemed an agent of the Fund. It
is understood and agreed that KDI, by separate agreement with the
Fund, may also serve the Fund in other capacities. The services
of KDI to the Fund under this Agreement are not to be deemed
exclusive, and KDI shall be free to render similar services or
other services to others.
In carrying out its duties and responsibilities hereunder, KDI
will, pursuant to separate administration services and selling
group agreements ("services agreements"), appoint various Firms
to provide administrative, distribution and other services
contemplated hereunder directly to or for the benefit of existing
and potential shareholders who may be clients of such Firms.
Such Firms shall at all times be deemed to be independent
contractors retained by KDI and not the Fund. KDI and not the
Fund will be responsible for the payment of compensation to such
Firms for such services.
KDI will use its best efforts with reasonable promptness to sell
such part of the authorized shares of the Fund remaining unissued
as from time to time shall be effectively registered under the
Securities Act of 1933 ("Securities Act"), at prices determined
as hereinafter provided and on terms hereinafter set forth, all
subject to applicable Federal and state laws and regulations and
to the Agreement and Declaration of Trust of the Fund. The price
the Fund shall receive for all shares purchased from the Fund
shall be the net asset value used in determining the public
offering price applicable to the sale of such shares.
2. KDI shall sell shares of the Fund to or through qualified
Firms in such manner, not inconsistent with the provisions hereof
and the then effective registration statement of the Fund under
the Securities Act (and related prospectus), as KDI may determine
from time to time, provided that no Firm or other person shall be
appointed or authorized to act as agent of the Fund without the
prior consent of the Fund. In addition to sales made by it as
agent of the Fund, KDI may, in its discretion, also sell shares
of the Fund as principal to persons with whom it does not have
services agreements.
Shares of the Fund offered for sale or sold by KDI shall be so
offered or sold at a price per share determined in accordance
with the then current prospectus relating to the sale of such
shares except as departure from such prices shall be permitted by
the rules and regulations of the Securities and Exchange
Commission; provided, however, that any public offering price for
shares of the Fund shall be the net asset value per share. The
net asset value per share of the Fund shall be determined in the
manner and at the times set forth in the then current prospectus
of the Fund relating to such shares.
2
<PAGE> 3
KDI will require each Firm to conform to the provisions hereof
and the Registration Statement (and related prospectus) at the
time in effect under the Securities Act with respect to the
public offering price of the Fund's shares, and neither KDI nor
any such Firms shall withhold the placing of purchase orders so
as to make a profit thereby.
3. The Fund will use its best efforts to keep effectively
registered under the Securities Act for sale as herein
contemplated such shares as KDI shall reasonably request and as
the Securities and Exchange Commission shall permit to be so
registered. Notwithstanding any other provision hereof, the Fund
may terminate, suspend or withdraw the offering of shares
whenever, in its sole discretion, it deems such action to be
desirable.
4. The Fund will execute any and all documents and furnish any
and all information which may be reasonably necessary in
connection with the qualification of its shares for sale
(including the qualification of the Fund as a dealer where
necessary or advisable) in such states as KDI may reasonably
request (it being understood that the Fund shall not be required
without its consent to comply with any requirement which in its
opinion is unduly burdensome). The Fund will furnish to KDI from
time to time such information with respect to the Fund and its
shares as KDI may reasonably request for use in connection with
the sale of shares of the Fund.
5. KDI shall issue and deliver or shall arrange for various
Firms to issue and deliver on behalf of the Fund such
confirmations of sales made by it as agent pursuant to this
Agreement as may be required. At or prior to the time of
issuance of shares, KDI will pay or cause to be paid to the Fund
the amount due the Fund for the sale of such shares.
Certificates shall be issued or shares registered on the transfer
books of the Fund in such names and denominations as KDI may
specify.
6. KDI shall order shares of the Fund from the Fund only to the
extent that it shall have received purchase orders therefor. KDI
will not make, or authorize any Firms or others to make, any
short sales of shares of the Fund. KDI, as agent of and for the
account of the Fund, may repurchase the shares of the Fund at
such prices and upon such terms and conditions as shall be
specified in the current prospectus of the Fund. In selling or
reacquiring shares of the Fund for the account of the Fund, KDI
will in all respects conform to the requirements of all state and
Federal laws and the Rules of Fair Practice of the National
Association of Securities Dealers, Inc., relating to such sale or
reacquisition, as the case may be, and will indemnify and save
harmless the Fund from any damage or expense on account of any
wrongful act by KDI or any employee, representative or agent of
3
<PAGE> 4
KDI. KDI will observe and be bound by all the provisions of the
Agreement and Declaration of Trust of the Fund (and of any
fundamental policies adopted by the Fund pursuant to the
Investment Company Act of 1940, notice of which shall have been
given to KDI) which at the time in any way require, limit,
restrict or prohibit or otherwise regulate any action on the part
of KDI.
7. The Fund shall assume and pay all charges and expenses of its
operations not specifically assumed or otherwise to be provided
by KDI under this Agreement. The Fund will pay or cause to be
paid expenses (including the fees and disbursements of its own
counsel) and all taxes and fees payable to the Federal, state or
other governmental agencies on account of the registration or
qualification of securities issued by the Fund or otherwise. The
Fund will also pay or cause to be paid expenses incident to the
issuance of shares of beneficial interest, such as the cost of
share certificates, issue taxes, and fees of the transfer agent.
KDI will pay all expenses (other than expenses which one or more
Firms may bear pursuant to any agreement with KDI) incident to
the sale and distribution of the shares issued or sold hereunder
including, without limiting the generality of the foregoing, all
expenses of printing and distributing any prospectus and of
preparing, printing and distributing or disseminating any other
literature, advertising and selling aids in connection with the
offering of the shares for sale (except that such expenses need
not include expenses incurred by the Fund in connection with the
preparation, typesetting, printing and distribution of any
registration statement, prospectus or report or other
communication to shareholders in their capacity as such) and
expenses of advertising in connection with such offering.
8. For the services and facilities described herein, the Fund
will pay to KDI at the end of each calendar month a distribution
services fee computed at an annual rate of 0.33 of 1% of the
average daily net assets of the Fund.
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.
The net asset value of each series of shares of the Fund
("Portfolio") shall be calculated in accordance with the
provisions of the Fund's current prospectus. On each day when
net asset value is not calculated, the net asset value of a share
of any Portfolio shall be deemed to be the net asset value of
such a share as of the close of business on the last day on which
such calculation was made for the purpose of the foregoing
computations.
4
<PAGE> 5
9. KDI shall prepare reports for the Board of Trustees of the
Fund on a quarterly basis showing amounts paid to the various
Firms, the basis for any discretionary payments made to such
Firms and such other information as from time to time shall be
reasonably requested by the Board of Trustees.
This Agreement shall become effective with respect to the Initial
Portfolio on the date hereof and shall continue until December 1,
1996 and shall continue from year to year thereafter with respect
to each Portfolio, but only so long as such continuance is
specifically approved for each Portfolio at least annually by a
vote of the Board of Trustees of the Fund including the trustees
who are not interested persons of the Fund and who have no direct
or indirect financial interest in this Agreement or in any
agreement related to this Agreement.
This Agreement may not be amended to increase the amount to be
paid to KDI for services hereunder without the vote of a majority
of the outstanding voting securities of each Portfolio of the
Fund. All material amendments to this Agreement must in any
event be approved by a vote of the Board of Trustees of the Fund
including the trustees who are not interested persons of the Fund
and who have no direct or indirect financial interest in this
Agreement or in any agreement related to this Agreement, cast in
person at a meeting called for such purpose.
10. This Agreement shall automatically terminate in the event of
its assignment and may be terminated at any time without the
payment of any penalty by the Fund or by KDI on sixty (60) days
written notice to the other party. The Fund may effect
termination with respect to any Portfolio by a vote of (i) a
majority of the Board of Trustees, (ii) a majority of the
trustees who are not interested persons of the Fund and who have
no direct or indirect financial interest in this Agreement or in
any agreement related to this Agreement, or (iii) a majority of
the outstanding voting securities of a Portfolio.
The terms "assignment", "interested" 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 KDI
to receive payments on any unpaid balance of the compensation
described in Section 8 earned prior to such termination.
11. KDI will not use or distribute or authorize the use,
distribution or dissemination by Firms or others in connection
with the sale of the shares any statements, other than those
contained in the Fund's current prospectus, except such
supplemental literature or advertising as shall be lawful under
5
<PAGE> 6
Federal and state securities laws and regulations, and will
furnish the Fund with copies of all such material.
12. 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.
13. 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.
14. All parties hereto are expressly put on notice of the Fund's
Agreement and Declaration of Trust and all amendments thereto,
all of which are on file with the Secretary of The Commonwealth
of Massachusetts, and the limitation of shareholder and trustee
liability contained therein. This Agreement has been executed by
and on behalf of the Fund by its representatives as such
representatives and not individually, and the obligations of the
Fund hereunder are not binding upon any of the trustees, officers
or shareholders of the Fund individually but are binding upon
only the assets and property of the Fund. With respect to any
claim by KDI for recovery of that portion of the distribution
services fees (or any other liability of the Fund arising
hereunder) allocated to a particular Portfolio, whether in
accordance with the express terms hereof or otherwise, KDI shall
have recourse solely against the assets of that Portfolio to
satisfy such claim and shall have no recourse against the assets
of any other Portfolio for such purpose.
15. This Agreement shall be construed in accordance with
applicable federal law and (except as to Section 14 hereof which
shall be construed in accordance with the laws of The
Commonwealth of Massachusetts) the laws of the State of Illinois.
6
<PAGE> 7
16. 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 Fund and KDI have caused this Agreement
to be executed as of the day and year first above written.
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
By: /s/ John E. Peters
-----------------------------
Title: Vice President
--------------------------
ATTEST: /s/ Philip J. Collora
-----------------------
Title: Secretary
-----------------------
KEMPER DISTRIBUTORS, INC.
By: /s/ Patrick H. Dudasik
-----------------------------
Title: Chief Financial Officer
and Treasurer
--------------------------
ATTEST: /s/ David F. Dierenfeldt
---------------------------
Title: Secretary
---------------------------
7
<PAGE> 1
EXHIBIT 99.B6(b).
ADMINISTRATION SERVICES AND SELLING GROUP AGREEMENT
AGREEMENT made this ____ day of _________________ between
KEMPER DISTRIBUTORS, INC. ("KDI"), as administrator, distributor
and principal underwriter for the "Fund" specified in the
Agreement (see attached exhibit), pursuant to the Administration,
Shareholder Services and Distribution Agreement ("Administration
Agreement") and __________________ ________________________ (the
"Firm").
In consideration of the mutual covenants hereinafter
contained, the parties agree as follows:
1. KDI hereby appoints the Firm to provide administration,
distribution and other services with respect to shares of the
Fund but only in those states in which shares of the Fund may
legally be sold. The Firm shall provide a cash management
service for its clients through the Fund. The Firm shall provide
such office space and equipment, telephone facilities, personnel,
literature distribution, advertising and promotion as is
necessary or beneficial for providing information and services to
existing and potential shareholders of the Fund, and to assist
the Fund's shareholder services agent in servicing accounts of
the Firm's clients who own Fund shares ("clients"). Such
services and assistance may include, but are not limited to,
establishment and maintenance of shareholder accounts and
records, processing purchase and redemption transactions,
automatic investment in Fund shares of client account cash
balances, answering routine client inquiries regarding the Fund,
assistance to clients in changing dividend options, account
designations and addresses, and such other services as KDI may
reasonably request.
The Firm shall provide such security as is necessary to
prevent unauthorized use of any on-line computer facilities. The
Firm agrees to release, indemnify and hold harmless the Fund and
KDI, and their respective agents and representatives, from any
and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by the Firm, its
officers, employees or agents regarding the purchase, redemption,
transfer or registration of Fund shares for accounts of the Firm,
its clients and other shareholders. Principals of the Firm will
be available to consult from time to time with KDI concerning the
administration of, and the performance of the services
contemplated by, this Agreement.
The Firm accepts such appointment and agrees during such
period to render such services and to assume the obligations
herein set forth for the compensation herein provided. The Firm
<PAGE> 2
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 KDI in any way or otherwise be deemed an agent of the
Fund or KDI.
2. As exclusive agent of the Fund, KDI offers to sell
shares of the Fund ("shares") to the Firm on the terms herein set
forth. In all sales of shares to the public, the Firm shall act
as dealer for its own account, and in no transaction shall it
have any authority to act as agent for the issuer, for KDI or for
any representative or agent of either the Fund or KDI.
3. Orders received from the Firm will be accepted by KDI
only at the public offering price applicable to each order as
established by the then current Prospectus of the Fund. All
orders are subject to acceptance or rejection by KDI in its sole
discretion.
4. The Firm may offer and sell shares to its customers
only at the public offering price which is the net asset value
per share as described in the Fund's Prospectus.
5. By accepting this Agreement, the Firm agrees:
(a) To purchase shares only from KDI or from the
Firm's customers.
(b) That the Firm will purchase shares from KDI only
to cover purchase orders already received from the
Firm's customers, or for its own bona fide
investment.
(c) That the Firm will not purchase shares from its
customers at a price lower than the price then
quoted by or for the Fund. The Firm may sell
shares for the account of its customer to the
Fund, or to KDI as agent for the Fund, at the
price currently quoted by or for the Fund.
(d) That the Firm will not withhold placing with KDI
orders received from its customers so as to profit
itself as a result of such withholding.
6. KDI will not accept from the Firm any conditional
orders for shares.
7. Shares sold to the Firm hereunder shall be available
against payment in the manner described in the Fund's Prospectus
unless other instructions have been given.
8. No person is authorized to make any representations
concerning shares of the Fund except those contained in the
current Prospectus of the Fund and in printed information
2
<PAGE> 3
subsequently issued by the Fund or by KDI as information
supplemental to such Prospectus.
9. All sales will be made subject to receipt by KDI of
shares from the Fund. KDI reserves the right, in its discretion,
without notice, to suspend sales or withdraw the offering of
shares entirely, or to modify, cancel or change the terms of this
Agreement.
10. The Firm's acceptance of this Agreement constitutes a
representation (i) that it is a registered security dealer and a
member in good standing of the National Association of Securities
Dealers, Inc. ("NASD") and that it agrees to comply with all
applicable state and federal laws, rules and regulations
applicable to transactions hereunder and to the Rules of Fair
Practice of the NASD, including specifically Section 26, Article
III thereof, or (ii) if it is offering and selling shares of the
Fund only in jurisdictions outside of the several states,
territories and possessions of the United States and is not
otherwise required to be a member of the NASD, that it
nevertheless agrees to conduct its business in accordance with
the spirit of the Rules of Fair Practice of the NASD, and to
observe the laws and regulations of the applicable jurisdiction.
The Firm likewise agrees that it will not offer or sell shares of
the Fund in any state or other jurisdiction in which they may not
lawfully be offered for sale.
11. For the services and facilities described in this
Agreement, KDI will pay a fee to the Firm after the end of each
month at the annual rate applicable to the average aggregate
daily net asset value of the Fund shares in the accounts for
which the Firm provides services in accordance with the attached
schedule.
12. The Firm shall prepare such quarterly reports for KDI
as shall reasonably be requested by KDI.
13. This Agreement shall become effective on the date
hereof and shall continue in effect until terminated. This
Agreement shall automatically terminate in the event of its
assignment and upon any termination of the Administration
Agreement. It may be terminated at any time by the Firm or by
KDI on thirty (30) days written notice.
14. The Firm acknowledges that KDI may enter into similar
agreements with others without the consent of the Firm.
15. 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 affected thereby.
3
<PAGE> 4
16. All communications to KDI should be sent to 120 South
LaSalle Street, Chicago, Illinois 60603. Any notice to the Firm
shall be duly given if mailed or telegraphed to the address
specified below. This Agreement shall be construed in accordance
with the laws of Illinois.
The Firm Kemper Distributors, Inc.
By: _________________________ By:_____________________________
Title: _____________________ Title:__________________________
Firm's Address: _____________________________
_____________________________
4
<PAGE> 5
Exhibit #__ of __
FUND: Tax-Exempt California Money Market Fund
----- ---------------------------------------
FEE SCHEDULE
<TABLE>
<CAPTION>
Applicable Fee
Average Daily Net Assets Rate (Annualized)
------------------------ -----------------
<S> <C>
Less than $10 million.......................... .15 of 1%
$10 million but less than $50 million ......... .27 of 1%
$50 million but less than $100 million ........ .30 of 1%
$100 million or more .......................... .33 of 1%
</TABLE>
In computing the Firm's fee, one-twelfth of the applicable fee
rate set forth above shall be applied to the average aggregate
daily net asset value of Fund shares in accounts for which the
Firm provides services for the month in question. Each month's
fee shall be determined independently of every other month's fee.
For purposes of determining which fee rate is applicable under
the schedule, average daily net assets will be the aggregate of
such assets maintained and served by the Firm for the Fund.
Administrator may in its discretion limit the applicable fee rate
under the above schedule to a maximum of .33 of 1%. For the
month 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.
<PAGE> 1
EXHIBIT 99.B8
CUSTODY AGREEMENT
AGREEMENT, made the 1st day of March, 1995 by and between
Tax-Exempt California Money Market Fund, a Massachusetts business
trust having its principal place of business at 120 South LaSalle
Street, Chicago, Illinois 60603 ("Fund") and Investors Fiduciary
Trust Company, a trust company organized and existing under the
laws of Missouri, having its principal place of business at
Kansas City, Missouri ("Custodian").
WHEREAS, Fund wants to appoint Investors Fiduciary Trust
Company as Custodian to have custody of the Fund's portfolio
securities and monies pursuant to this Agreement; and
WHEREAS, Investors Fiduciary Trust Company wants to accept
such appointment;
NOW, THEREFORE, for and in consideration of the mutual
promises contained herein, the parties hereto, intending to be
legally bound, mutually covenant and agree as follows:
1. APPOINTMENT OF CUSTODIAN.
Fund hereby constitutes and appoints Investors Fiduciary
Trust Company as Custodian of Fund which is to include:
A. Custody of the securities and monies at any time
owned by Fund; and
B. Performing certain accounting and record keeping
functions relating to its function as Custodian for Fund and
each of its Portfolios.
2. DELIVERY OF CORPORATE DOCUMENTS.
Fund has delivered or will deliver to Custodian prior to the
effective date of this Agreement, copies of the following
documents and all amendments or supplements thereto,
properly certified or authenticated:
A. Resolutions of the Board of Trustees of Fund
appointing Investors Fiduciary Trust Company as Custodian
hereunder and approving the form of this Agreement; and
B. Resolutions of the Board of Trustees of Fund
authorizing certain persons to give instructions on behalf
of Fund to Custodian and authorizing Custodian to rely upon
written instructions over their signatures.
<PAGE> 2
3. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
A. Delivery of Assets
Fund will deliver or cause to be delivered to Custodian
on the effective date of this Agreement, or as soon
thereafter as practicable, and from time to time thereafter,
all portfolio securities acquired by it and monies then
owned by it except as permitted by the Investment Company
Act of 1940 ("1940 Act") or from time to time coming into
its possession during the time this Agreement shall continue
in effect. Custodian shall have no responsibility or
liability whatsoever for or on account of securities or
monies not so delivered. All securities so delivered to
Custodian (other than bearer securities) shall be registered
in the name of Fund or its nominee, or of a nominee of
Custodian, or shall be properly endorsed and in form for
transfer satisfactory to Custodian.
B. Safekeeping
Custodian will receive delivery of and keep safely the
assets of Fund delivered to it from time to time. Custodian
will not deliver any such assets to any person except as
permitted by the provisions of this Agreement or any
agreement executed by it according to the terms of this
Agreement. Custodian shall be responsible only for the
monies and securities of Fund held directly by it or its
nominees or sub-custodian under this Agreement; provided
that Custodian's responsibility for any sub-custodian
appointed at the Fund's direction for purposes of (i)
effecting third-party repurchase transactions with banks,
brokers, dealers, or other entities through the use of a
common custodian or sub-custodian; or (ii) providing
depository and clearing agency services with respect to
certain variable rate demand note securities ("special sub-
custodian") shall be further limited as set forth in this
Agreement. Custodian may participate directly or indirectly
through a sub-custodian in the Depository Trust Company, the
Treasury/Federal Reserve Book Entry System, the Participants
Trust Company and any other securities depository approved
by the Board of Trustees of the Fund, subject to compliance
with the provisions of Rule 17f-4 under the 1940 Act
including, without limitation, the specific provisions of
subsections (a) (1) through (d) (4) thereof.
C. Registration of Securities
Custodian will hold stocks and other registerable
portfolio securities of Fund registered in the name of Fund
or in the name of any nominee of Custodian for whose
fidelity and liabilities Custodian shall be fully
2
<PAGE> 3
responsible, or in street certificate form, so-called, with
or without any indication of fiduciary capacity. Unless
otherwise instructed, Custodian will register all such
portfolio securities in the name of its authorized nominee.
D. Exchange of Securities
Upon receipt of instructions, Custodian will exchange,
or cause to be exchanged, portfolio securities held by it
for the account of Fund for other securities or cash issued
or paid in connection with any reorganization,
recapitalization, merger, consolidation, split-up of shares,
change of par value, conversion or otherwise, and will
deposit any such securities in accordance with the terms of
any reorganization or protective plan. Without
instructions, Custodian is authorized to exchange securities
held by it in temporary form for securities in definitive
form, to effect an exchange of shares when the par value of
the stock is changed, and, upon receiving payment therefore,
to surrender bonds or other securities held by it at
maturity or when advised of earlier call for redemption,
except that Custodian shall receive instructions prior to
surrendering any convertible security.
E. Purchases or Sales of Investments of Fund
Fund shall, on each business day on which a purchase or
sale of a portfolio security shall be made by it, deliver to
Custodian instructions which shall specify with respect to
each such transaction:
(1) The name of the issuer and description of the security;
(2) The number of shares or the principal amount purchased
or sold, and accrued interest, if any;
(3) The trade date;
(4) The settlement date;
(5) The date when the securities sold were purchased by
Fund or other information identifying the securities
sold and to be delivered;
(6) The price per unit and the brokerage commission, taxes
and other expenses in connection with the transaction;
(7) The total amount payable or receivable upon such
transaction; and
(8) The name of the person from whom or the broker or
dealer through whom the transaction was made.
3
<PAGE> 4
In accordance with such purchase instructions, Custodian
shall pay for out of monies held for the account of Fund,
but only insofar as monies are available therein for such
purpose, and receive the portfolio securities so purchased
by or for the account of Fund. Such payment shall be made
only upon receipt by Custodian of the securities so
purchased in form for transfer satisfactory to Custodian.
In accordance with such sales instructions, Custodian will
deliver or cause to be delivered the securities thus
designated as sold for the account of Fund to the broker or
other person specified in the instructions relating to such
sale, such delivery to be made only upon receipt of payment
therefor in such form as shall be satisfactory to Custodian,
with the understanding that Custodian may deliver or cause
to be delivered securities for payment in accordance with
the customs prevailing among dealers in securities.
F. Purchases or Sales of Options and Futures
Transactions
Fund will, on each business day on which a purchase or
sale of the following options and/or futures shall be made
by it, deliver to Custodian instructions which shall specify
with respect to each such purchase or sale:
(1) Securities Options
(a) The underlying security;
(b) The price at which purchased or sold;
(c) The expiration date;
(d) The number of contracts;
(e) The exercise price;
(f) Whether opening, exercising, expiring or closing
the transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased;
(i) Market on which option traded; and
(j) Name and address of the broker or dealer through
whom the sale or purchase was made.
(2) Options on Indices
(a) The index;
(b) The price at which purchased or sold;
(c) The exercise price;
(d) The premium;
(e) The multiple;
(f) The expiration date;
(g) Whether the transaction is an opening, exercising,
expiring or closing transaction;
(h) Whether the transaction involves a put or call;
4
<PAGE> 5
(i) Whether the option is written or purchased; and
(j) Name and address of the broker or dealer through
whom the sale or purchase was made.
(3) Securities Index Futures Transactions
(a) The last trading date specified in the contract
and, when available, the closing level, thereof;
(b) The index level on the date the contract is
entered into;
(c) The multiple;
(d) Any margin requirements;
(e) The need for a segregated margin account (in
addition to instructions; and, if not already in
the possession of Custodian, Fund shall deliver a
substantially complete and executed custodial
safekeeping account and procedural agreement which
shall be incorporated into this Custody
Agreement); and
(f) The name and address of the futures commission
merchant through whom the sale or purchase was
made.
(4) Options on Index Futures Contracts
(a) The underlying index futures contract;
(b) The premium;
(c) The expiration date;
(d) The number of options;
(e) The exercise price;
(f) Whether the transaction involves an opening,
exercising, expiring or closing transaction;
(g) Whether the transaction involves a put or call;
(h) Whether the option is written or purchased; and
(i) The market on which the option is traded.
G. Securities Pledged to Secure Loans
(1) Upon receipt of instructions, Custodian will
release or cause to be released securities held in custody
to the pledgee designated in such instructions by way of
pledge or hypothecation to secure any loan incurred by Fund;
provided, however, that the securities shall be released
only upon payment to Custodian of the monies borrowed,
except that in cases where additional collateral is required
to secure a borrowing already made, further securities may
be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions,
Custodian will pay, but only from funds available for such
purpose, any such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing such loan.
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<PAGE> 6
(2) Upon receipt of instructions, Custodian will
release securities held in custody to the borrower
designated in such instructions; provided, however, that the
securities shall be released only upon deposit with
Custodian of full cash collateral as specified in such
instructions, and that Fund will retain the right to any
dividends, interest or distribution on such loaned
securities. Upon receipt of instructions and the loaned
securities, Custodian will release the cash collateral to
the borrower.
H. Routine Matters
Custodian will, in general, attend to all routine and
mechanical matters in connection with the sale, exchange,
substitution, purchase, transfer, or other dealings with
securities or other property of Fund except as may be
otherwise provided in this Agreement or directed from time
to time by the Board of Trustees of Fund.
I. Demand Deposit Account
Custodian will open and maintain a demand deposit
account or accounts in the name of Custodian, subject only
to draft or order by Custodian upon receipt of instructions.
All monies received by Custodian from or for the account of
Fund shall be deposited in said account or accounts.
When properly authorized by a resolution of the Board
of Trustees of Fund, Custodian may open and maintain an
additional demand deposit account or accounts in such other
banks or trust companies as may be designated in such
resolution, such accounts, however, to be in the name of
Custodian and subject only to its draft or order.
J. Income and Other Payments to Fund
Custodian will:
(1) collect, claim and receive and deposit for the
account of Fund all income and other payments which become
due and payable on or after the effective date of this
Agreement with respect to the securities deposited under
this Agreement, and credit the account of Fund with such
income on the payable date;
(2) execute ownership and other certificates and
affidavits for all federal, state and local tax purposes in
connection with the collection of bond and note coupons; and
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<PAGE> 7
(3) take such other action as may be necessary or
proper in connection with:
(a) the collection, receipt and deposit of such income
and other payments, including but not limited to the
presentation for payment of:
(1) all coupons and other income items requiring
presentation;
(2) all other securities which may mature or be
called, redeemed, retired or otherwise become
payable and regarding which the Custodian has
actual knowledge, or notice of which is contained
in publications of the type to which it normally
subscribes for such purpose; and
(b) the endorsement for collection, in the name of
Fund, of all checks, drafts or other negotiable
instruments.
Custodian, however, shall not be required to institute
suit or take other extraordinary action to enforce
collection except upon receipt of instructions and upon
being indemnified to its satisfaction against the costs and
expenses of such suit or other actions. Custodian will
receive, claim and collect all stock dividends, rights and
other similar items and deal with the same pursuant to
instructions. Unless prior instructions have been received
to the contrary, Custodian will, without further
instructions, sell any rights held for the account of Fund
on the last trade date prior to the date of expiration of
such rights.
K. Payment of Dividends and Other Distributions
On the declaration of any dividend or other
distribution on the shares of beneficial interest of any
Portfolio ("Portfolio Shares") by the Board of Trustees of
Fund, Fund shall deliver to Custodian instructions with
respect thereto, including a copy of the Resolution of said
Board of Trustees certified by the Secretary or an Assistant
Secretary of Fund wherein there shall be set forth the
record date as of which shareholders are entitled to receive
such dividend or distribution, and the amount payable per
share on such dividend or distribution.
On the date specified in such Resolution for the
payment of such dividend or other distribution, Custodian
shall pay out of the monies held for the account of Fund,
insofar as the same shall be available for such purposes,
and credit to the account of the Dividend Disbursing Agent
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<PAGE> 8
for Fund, such amount as may be necessary to pay the amount
per share payable in cash on Portfolio Shares issued and
outstanding on the record date established by such
Resolution.
L. Portfolio Shares Purchased by Fund
Whenever any Portfolio Shares are purchased by Fund,
Fund or its agent shall advise Custodian of the aggregate
dollar amount to be paid for such shares and shall confirm
such advice in writing. Upon receipt of such advice,
Custodian shall charge such aggregate dollar amount to the
custody account of Fund and either deposit the same in the
account maintained for the purpose of paying for the
purchase of Portfolio Shares or deliver the same in
accordance with such advice.
M. Portfolio Shares Purchased from Fund
Whenever Portfolio Shares are purchased from Fund, Fund
will deposit or cause to be deposited with Custodian the
amount received for such shares. Custodian shall not have
any duty or responsibility to determine that Fund Shares
purchased from Fund have been added to the proper
shareholder account or accounts or that the proper number of
such shares have been added to the shareholder records.
N. Proxies and Notices
Custodian will promptly deliver or mail to Fund all
proxies properly signed, all notices of meetings, all proxy
statements and other notices, requests or announcements
affecting or relating to securities held by Custodian for
Fund and will, upon receipt of instructions, execute and
deliver or cause its nominee to execute and deliver such
proxies or other authorizations as may be required. Except
as provided by this Agreement or pursuant to instructions
hereafter received by Custodian, neither it nor its nominee
shall exercise any power inherent in any such securities,
including any power to vote the same, or execute any proxy,
power of attorney, or other similar instrument voting any of
such securities, or give any consent, approval or waiver
with respect thereto, or take any other similar action.
O. Disbursements
Custodian will pay or cause to be paid insofar as funds
are available for the purpose, bills, statements and other
obligations of Fund (including but not limited to
obligations in connection with the conversion, exchange or
surrender of securities owned by Fund, interest charges,
variation margin, dividend disbursements, taxes, management
8
<PAGE> 9
fees, administration-distribution fees, custodian fees,
legal fees, auditors' fees, transfer agents' fees, brokerage
commissions, compensation to personnel, and other operating
expenses of Fund) pursuant to instructions of Fund setting
forth the name of the person to whom payment is to be made,
the amount of the payment, and the purpose of the payment.
P. Books, Records and Accounts
Custodian acknowledges that all the records it shall
prepare and maintain pursuant to this Agreement shall be the
property of Fund and that upon request of Fund it shall make
Fund's records available to it, along with such other
information and data as are reasonably requested by Fund,
for inspection, audit or copying, or turn said records over
to Fund.
Custodian shall, within a reasonable time, render to
Fund as of the close of business on each day, a detailed
statement of the amounts received or paid and of securities
received or delivered for the account of Fund during said
day. Custodian shall, from time to time, upon request by
Fund, render a detailed statement of the securities and
monies held for Fund under this Agreement, and Custodian
shall maintain such books and records as are necessary to
enable it do so and shall permit such persons as are
authorized by Fund, including Fund's independent public
accountants, to examine such records or to confirm the
contents of such records; and, if demanded, shall permit
federal and state regulatory agencies to examine said
securities, books and records. Upon the written
instructions of Fund or as demanded by federal or state
regulatory agencies, Custodian shall instruct any sub-
custodian to permit such persons as are authorized by Fund
to examine the books, records and securities held by such
sub-custodian which relate to Fund.
Q. Appointment of Sub-Custodian
Notwithstanding any other provisions of this Agreement,
all or any of the monies or securities of Fund may be held
in Custodian's own custody or in the custody of one or more
other banks or trust companies acting as sub-custodians as
may be approved by resolutions of Fund's Board of Trustees,
evidenced by a copy thereof certified by the Secretary or
Assistant Secretary of Fund. Any sub-custodian must have
the qualifications required for custodians under the 1940
Act unless exempted therefrom. Any sub-custodian may
participate directly or indirectly in the Depository Trust
Company, the Treasury/Reserve Book Entry System, the
Participants Trust Company and any other securities
depository approved by the Board of Trustees of the Fund to
9
<PAGE> 10
the same extent and subject to the same conditions as
provided hereunder. Neither Custodian nor sub-custodian
shall be entitled to reimbursement by Fund for any fees or
expenses of any sub-custodian; provided that Custodian shall
not be liable for, and Fund shall hold Custodian harmless
from, the expenses of any special sub-custodian. The
appointment of a sub-custodian shall not relieve Custodian
of any of its obligations hereunder; provided that Custodian
shall be responsible to Fund for any loss, damage, or
expense suffered or incurred by Fund resulting from the
actions or omissions of a special sub-custodian only to the
extent the special sub-custodian is liable to Custodian.
R. Multiple Portfolios
If Fund shall issue shares of more than one Portfolio
during the term hereof, Custodian agrees that all securities
and other assets of Fund shall be segregated by Portfolio
and all books and records, account values or actions shall
be maintained, held, made or taken, as the case may be,
separately for each Portfolio.
4. INSTRUCTIONS.
A. The term "instructions", as used herein, means
written or oral instructions to Custodian from an authorized
person of Fund. Certified copies of resolutions of the
Board of Trustees of Fund naming one or more persons
authorized to give instructions in the name and on behalf of
Fund may be received and accepted by Custodian as conclusive
evidence of the authority of any person so to act and may be
considered to be in full force and effect (and Custodian
shall be fully protected in acting in reliance thereon)
until receipt by Custodian of notice to the contrary.
Unless the resolution authorizing any person to give
instructions specifically requires that the approval of
anyone else shall first have been obtained, Custodian shall
be under no obligation to inquire into the right of the
person giving such instructions to do so. Notwithstanding
any of the foregoing provisions of this Section 4, no
authorizations or instructions received by Custodian from
Fund shall be deemed to authorize or permit any trustee,
officer, employee, or agent of Fund to withdraw any of the
securities or monies of Fund upon the mere receipt of
instructions from such trustee, officer, employee or agent.
B. No later than the next business day immediately
following each oral instruction referred to herein, Fund
shall give Custodian written confirmation of each such oral
instruction. Either party may electronically record any
oral instruction whether given in person or via telephone.
10
<PAGE> 11
5. LIMITATION OF LIABILITY OF CUSTODIAN
A. Custodian shall hold harmless and indemnify Fund
from and against any loss or liability arising out of
Custodian's failure to comply with the terms of this
Agreement or arising out of Custodian's negligence, willful
misconduct, or bad faith. Custodian may request and obtain
the advice and opinion of counsel for Fund or of its own
counsel with respect to questions or matters of law, and it
shall be without liability to Fund for any action taken or
omitted by it in good faith, in conformity with such advice
or opinion.
B. If Fund requires Custodian in any capacity to
take, with respect to any securities, any action which
involves the payment of money by it, or which in Custodian's
opinion might make it or its nominee liable for payment of
monies or in any other way, Custodian shall be and be kept
indemnified by Fund in an amount and form satisfactory to
Custodian against any liability on account of such action.
C. Custodian shall be entitled to receive, and Fund
agrees to pay to Custodian, on demand, reimbursement for
such cash disbursements, costs and expenses as may be agreed
upon from time to time by Custodian and Fund.
D. Custodian shall be protected in acting as
custodian hereunder upon any instructions, advice, notice,
request, consent, certificate or other instrument or paper
reasonably appearing to it to be genuine and to have been
properly executed and shall, unless otherwise specifically
provided herein, be entitled to receive as conclusive proof
of any fact or matter required to be ascertained from Fund
hereunder, a certificate signed by Fund's President, or
other officer specifically authorized for such purpose.
E. Without limiting the generality of the foregoing,
Custodian shall be under no duty or obligation to inquire
into, and shall not be liable for:
(1) The validity of the issue of any securities
purchased by or for Fund, the legality of the purchase
thereof or evidence of ownership required by Fund to be
received by Custodian, or the propriety of the decision
to purchase or amount paid therefor;
(2) The legality of the sales of any securities
by or for Fund, or the propriety of the amount paid
therefor;
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<PAGE> 12
(3) The legality of the issue or sale of any
shares of Fund, or the sufficiency of the amount to be
received therefor;
(4) The legality of the purchase of any shares of
Fund, or the propriety of the amount to be paid
therefor; or
(5) The legality of the declaration of any
dividend by Fund, or the legality of the issue of any
shares of Fund in payment of any share dividend.
F. Custodian shall not be liable for, or considered
to be the custodian of, any money represented by any check,
draft, wire transfer, clearing house funds, uncollected
funds, or instrument for the payment of money received by it
on behalf of Fund, until Custodian actually receives such
money, provided only that it shall advise Fund promptly if
it fails to receive any such money in the ordinary course of
business, and use its best efforts and cooperate with Fund
toward the end that such money shall be received.
G. Subject to the obligations of Custodian under
Section 3.B. hereof, Custodian shall not be responsible for
loss occasioned by the acts, neglects, defaults or
insolvency of any broker, bank, trust company, or any other
person with whom Custodian may deal in the absence of negli-
gence, misconduct or bad faith on the part of Custodian.
H. Custodian or any sub-custodian shall provide Fund
for its approval by its Board of Trustees agreements with
banks or trust companies which will act as sub-custodian for
Fund pursuant to this Agreement; and, as set forth in
Section 3.B hereof, Custodian shall be responsible for the
monies and securities of the Fund held by it or its nominees
or sub-custodians under this Agreement, but not for monies
and securities of the Fund held by any special sub-custodian
except to the extent the special sub-custodian is liable to
Custodian.
6. COMPENSATION.
Fund shall pay to Custodian such compensation at such times
as may from time to time be agreed upon in writing by Custodian
and Fund. Custodian may charge such compensation against monies
held by it for the account of Fund. Custodian shall also be
entitled, notwithstanding the provisions of Sections 5B or 5C
hereof, to charge against any monies held by it for the account
of Fund the amount of any loss, damage, liability or expense for
which it shall be entitled to reimbursement under the provisions
of this Agreement. Custodian shall not be entitled to
reimbursement by Fund for any loss or expenses of any sub-
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<PAGE> 13
custodian; provided that Custodian shall not be liable for, and
Fund shall hold Custodian harmless from, the expenses of any
special sub-custodian.
7. TERMINATION.
Either party to this Agreement may terminate the same by
notice in writing, delivered or mailed, postage prepaid, to the
other party hereto and received not less than sixty (60) days
prior to the date upon which such termination shall take effect.
Upon termination of this Agreement, Fund shall pay to Custodian
such compensation for its reimbursable disbursements, costs and
expenses paid or incurred to such date and Fund shall use its
best efforts to obtain a successor custodian. Unless the holders
of a majority of the outstanding shares of Fund vote to have the
securities, funds and other properties held under this Agreement
delivered and paid over to some other person, firm or corporation
specified in the vote, having not less than Two Million Dollars
($2,000,000) aggregate capital, surplus and undivided profits, as
shown by its last published report, and meeting such other
qualifications for custodian as set forth in the Bylaws of Fund,
the Board of Trustees of Fund shall, forthwith upon giving or
receiving notice of termination of this Agreement, appoint as
successor custodian a bank or trust company having such
qualifications. Custodian shall, upon termination of this
Agreement, deliver to the successor custodian so specified or
appointed, at custodian's office, all securities then held by
Custodian hereunder, duly endorsed and in form for transfer, and
all funds and other properties of Fund deposited with or held by
Custodian hereunder, and shall cooperate in effecting changes in
book-entries at the Depository Trust Company, the
Treasury/Federal Reserve Book-Entry System, the Participants
Trust Company and any other securities depository holding assets
of the Fund. In the event no such vote has been adopted by the
shareholders of Fund and no written order designating a successor
custodian shall have been delivered to Custodian on or before the
date when such termination shall become effective, then Custodian
shall deliver the securities, funds and properties of Fund to a
bank or trust company at the selection of Custodian and meeting
the qualifications for custodian, if any, set forth in the Bylaws
of Fund and having not less than Two Million Dollars ($2,000,000)
aggregate capital, surplus and undivided profits, as shown by its
last published report. Upon either such delivery to a successor
custodian, Custodian shall have no further obligations or
liabilities under this Agreement. Thereafter such bank or trust
company shall be the successor custodian under this Agreement and
shall be entitled to reasonable compensation for its services.
In the event that no such successor custodian can be found, Fund
will submit to its shareholders, before permitting delivery of
the cash and securities owned by Fund to anyone other than a
successor custodian, the question of whether Fund shall be
liquidated or shall function without a custodian. Not-
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<PAGE> 14
withstanding the foregoing requirement as to delivery upon
termination of this Agreement, Custodian may make any other
delivery of the securities, funds and property of Fund which
shall be permitted by the 1940 Act and Fund's Agreement and
Declaration of Trust and Bylaws then in effect. Except as
otherwise provided herein, neither this Agreement nor any portion
thereof may be assigned by Custodian without the consent of Fund,
authorized or approved by a resolution of its Board of Trustees.
8. NOTICES.
Notices, requests, instructions and other writings received
by Fund at 120 South LaSalle Street, Chicago, Illinois 60603 or
at such other address as Fund may have designated by certified
resolution of the Board of Trustees to Custodian and notices,
requests, instructions and other writings received by Custodian
at its offices at 21 West 10th Street, Kansas City, Missouri
64105, or to such other address as it may have designated to Fund
in writing, shall be deemed to have been properly given
hereunder.
9. MISCELLANEOUS.
A. This Agreement is executed and delivered in the
State of Missouri and shall be governed by the laws of the
State of Missouri (except as to Section 9.H. hereof which
shall be governed in accordance with the laws of The
Commonwealth of Massachusetts).
B. All the terms and provisions of this Agreement
shall be binding upon, inure to the benefit of, and be
enforceable by the respective successors and assigns of the
parties hereto.
C. No provisions of the Agreement may be amended or
modified in any manner except by a written agreement
properly authorized and executed by both parties hereto.
D. 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.
E. This Agreement shall become effective at the close
of business on the date hereof.
F. 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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<PAGE> 15
G. If any part, term or provision of this Agreement
is by the courts held to be illegal, in conflict with any
law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and
enforced as if the Agreement did not contain the particular
part, term or provision held to be illegal or invalid.
H. All parties hereto are expressly put on notice of
Fund's Agreement and Declaration of Trust, which is on file
with the Secretary of The Commonwealth of Massachusetts, and
the limitation of shareholder and trustee liability
contained therein. This Agreement has been executed by and
on behalf of Fund by its representatives as such
representatives and not individually, and the obligations of
Fund hereunder are not binding upon any of the Trustees,
officers or shareholders of Fund individually but are
binding upon only the assets and property of Fund. With
respect to any claim by Custodian for recovery of that
portion of the compensation (or any other liability of Fund
arising hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms hereof or
otherwise, Custodian shall have recourse solely against the
assets of that Portfolio to satisfy such claim and shall
have no recourse against the assets of any other Portfolio
for such purpose.
I. This Agreement, together with the Fee Schedule, is
the entire contract between the parties relating to the
subject matter hereof and supersedes all prior agreements.
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<PAGE> 16
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their respective authorized officers.
TAX-EXEMPT CALIFORNIA MONEY
MARKET FUND
By: /s/ John E. Peters
------------------------------
Title: Vice President
---------------------------
Attest: /s/ Philip J. Collora
-----------------------
Title: Secretary
------------------------
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ Joseph F. Smith
------------------------------
Title: E. V. P.
---------------------------
Attest: /s/ Marvin Rau
-----------------------
Title: Secretary
------------------------
16
<PAGE> 1
EXHIBIT 99.B9
AGENCY AGREEMENT
AGREEMENT dated the 1st day of April, 1991, by and between
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND, a Massachusetts
business trust having its principal place of business at 120
South LaSalle Street, Chicago, IL 60603 ("Fund"), and
INVESTORS FIDUCIARY TRUST COMPANY, a state chartered trust
company organized and existing under the laws of the State of
Missouri having its principal place of business at 127 West
10th Street, Kansas City, Missouri 64105 ("IFTC").
WHEREAS, Fund wants to appoint IFTC as Transfer Agent
and Dividend Disbursing Agent, and IFTC wants to accept such
appointment;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Documents to be Filed with Appointment.
--------------------------------------
In connection with the appointment of IFTC as
Transfer Agent and Dividend Disbursing Agent for
Fund, there will be filed with IFTC the following
documents:
A. A certified copy of the resolutions of the Board
of Trustees of Fund appointing IFTC as Transfer
Agent and Dividend Disbursing Agent, approving
the form of this Agreement, and designating
certain persons to give written instructions and
requests on behalf of Fund.
B. A certified copy of the Agreement and Declaration
of Trust of Fund and any amendments thereto.
C. A certified copy of the Bylaws of Fund.
D. Copies of Registration Statements filed with the
Securities and Exchange Commission.
E. Specimens of all forms of outstanding share
certificates as approved by the Board of Trustees
of Fund, with a certificate of the Secretary of
Fund as to such approval.
F. Specimens of the signatures of the officers of
the Fund authorized to sign share certificates
and individuals authorized to sign written
instructions and requests on behalf of the Fund.
<PAGE> 2
G. An opinion of counsel for Fund:
(1) With respect to Fund's organization and
existence under the laws of The Commonwealth
of Massachusetts.
(2) With respect to the status of all shares of
Fund covered by this appointment under the
Securities Act of 1933, and any other
applicable federal or state statute.
(3) To the effect that all issued shares are, and
all unissued shares will be when issued,
validly issued, fully paid and non-
assessable.
2. Certain Representations and Warranties of IFTC. IFTC
represents and warrants to Fund that:
A. It is a trust company duly organized and existing
and in good standing under the laws of the State
of Missouri.
B. It is duly qualified to carry on its business in
the State of Missouri.
C. It is empowered under applicable laws and by its
Articles of Incorporation and Bylaws to enter
into and perform the services contemplated in
this Agreement.
D. All requisite corporate proceedings have been
taken to authorize it to enter into and perform
this Agreement.
E. It has and will continue to have and maintain the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement.
F. It is, and will continue to be, registered as a
transfer agent under the Securities Exchange Act
of 1934.
3. Certain Representations and Warranties of Fund.
Fund represents and warrants to IFTC that:
A. It is a business trust duly organized and
existing and in good standing under the laws of
The Commonwealth of Massachusetts.
2
<PAGE> 3
B. It is an investment company registered under the
Investment Company Act of 1940.
C. A registration statement under the Securities Act
of 1933 has been filed and will be effective with
respect to all shares of Fund being offered for
sale at any time and from time to time.
D. All requisite steps have been or will be taken to
register Fund's shares for sale in all applicable
states, including the District of Columbia.
E. Fund and its Trustees are empowered under
applicable laws and by the Fund's Agreement and
Declaration of Trust and Bylaws to enter into and
perform this Agreement.
4. Scope of Appointment.
--------------------
A. Subject to the conditions set forth in this
Agreement, Fund hereby employs and appoints IFTC
as Transfer Agent and Dividend Disbursing Agent
effective the date hereof.
B. IFTC hereby accepts such employment and
appointment and agrees that it will act as Fund's
Transfer Agent and Dividend Disbursing Agent.
IFTC agrees that it will also act as agent in
connection with Fund's periodic withdrawal
payment accounts and other open-account or
similar plans for shareholders, if any.
C. IFTC agrees to provide the necessary facilities,
equipment and personnel to perform its duties and
obligations hereunder in accordance with industry
practice.
D. Fund agrees to use all reasonable efforts to
deliver to IFTC in Kansas City, Missouri, as soon
as they are available, all its shareholder
account records.
E. Subject to the provisions of Sections 20 and 21
hereof, IFTC agrees that it will perform all the
usual and ordinary services of Transfer Agent and
Dividend Disbursing Agent and as agent for the
various shareholder accounts, including, without
limitation, the following: issuing, transferring
and cancelling share certificates, maintaining
all shareholder accounts, preparing shareholder
meeting lists, mailing proxies, receiving and
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<PAGE> 4
tabulating proxies, mailing shareholder reports
and prospectuses, withholding federal income
taxes, preparing and mailing checks for
disbursement of income and capital gains
dividends, preparing and filing all required U.S.
Treasury Department information returns for all
shareholders, preparing and mailing confirmation
forms to shareholders and dealers with respect to
all purchases and liquidations of Fund shares and
other transactions in shareholder accounts for
which confirmations are required, recording
reinvestments of dividends and distributions in
Fund shares, recording redemptions of Fund shares
and preparing and mailing checks for payments
upon redemption and for disbursements to
systematic withdrawal plan shareholders.
5. Compensation and Expenses.
-------------------------
A. In consideration for the services provided
hereunder by IFTC as Transfer Agent and Dividend
Disbursing Agent, Fund will pay to IFTC from time
to time compensation as agreed upon for all
services rendered as Agent, and also, all its
reasonable out-of-pocket expenses and other
disbursements incurred in connection with the
agency. Such compensation will be set forth in a
separate schedule to be agreed to by Fund and
IFTC. The initial agreement regarding
compensation is attached as Exhibit A.
B. Fund agrees to promptly reimburse IFTC for all
reasonable out-of-pocket expenses or advances
incurred by IFTC in connection with the
performance of services under this Agreement
including, but not limited to, postage (and first
class mail insurance in connection with mailing
share certificates), envelopes, check forms,
continuous forms, forms for reports and
statements, stationery, and other similar items,
telephone and telegraph charges incurred in
answering inquiries from dealers or shareholders,
microfilm used each year to record the previous
year's transactions in shareholder accounts and
computer tapes used for permanent storage of
records and cost of insertion of materials in
mailing envelopes by outside firms. IFTC may, at
its option, arrange to have various service
providers submit invoices directly to the Fund
for payment of out-of-pocket expenses
reimbursable hereunder.
4
<PAGE> 5
6. Efficient Operation of IFTC System.
----------------------------------
A. In connection with the performance of its
services under this Agreement, IFTC is
responsible for the accurate and efficient
functioning of its system at all times,
including:
(1) The accuracy of the entries in IFTC's records
reflecting purchase and redemption orders and
other instructions received by IFTC from
dealers, shareholders, Fund or its principal
underwriter.
(2) The timely availability and the accuracy of
shareholder lists, shareholder account
verifications, confirmations and other
shareholder account information to be
produced from IFTC's records or data.
(3) The accurate and timely issuance of dividend
and distribution checks in accordance with
instructions received from Fund.
(4) The accuracy of redemption transactions and
payments in accordance with redemption
instructions received from dealers,
shareholders or Fund or other authorized
persons.
(5) The deposit daily in Fund's appropriate
special bank account of all checks and
payments received from dealers or
shareholders for investment in shares.
(6) The requiring of proper forms of
instructions, signatures and signature
guarantees and any necessary documents
supporting the rightfulness of transfers,
redemptions and other shareholder account
transactions, all in conformance with IFTC's
present procedures with such changes as may
be deemed reasonably appropriate by IFTC or
as may be reasonably approved by or on behalf
of Fund.
(7) The maintenance of a current duplicate set of
Fund's essential or required records, as
agreed upon from time to time by Fund and
IFTC, at a secure distant location, in form
available and usable forthwith in the event
5
<PAGE> 6
of any breakdown or disaster disrupting its
main operation.
7. Indemnification.
---------------
A. Fund shall indemnify and hold IFTC harmless from
and against any and all claims, actions, suits,
losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of
or attributable to any action or omission by IFTC
pursuant to this Agreement or in connection with
the agency relationship created by this
Agreement, provided that IFTC has acted in good
faith, without negligence and without willful
misconduct.
B. IFTC shall indemnify and hold Fund harmless from
and against any and all claims, actions, suits,
losses, damages, costs, charges, counsel fees,
payments, expenses and liabilities arising out of
or attributable to any action or omission by IFTC
pursuant to this Agreement or in connection with
the agency relationship created by this
Agreement, provided that IFTC has not acted in
good faith, without negligence and without
willful misconduct.
C. In order that the indemnification provisions
contained in this Section 7 shall apply, upon the
assertion of a claim for which either party (the
"Indemnifying Party") may be required to provide
indemnification hereunder, the party seeking
indemnification (the "Indemnitee") shall promptly
notify the Indemnifying Party of such assertion,
and shall keep such party advised with respect to
all developments concerning such claim. The
Indemnifying Party shall be entitled to assume
control of the defense and the negotiations, if
any, regarding settlement of the claim. If the
Indemnifying Party assumes control, the
Indemnitee shall have the option to participate
in the defense and negotiations of such claim at
its own expense. The Indemnitee shall in no
event confess, admit to, compromise, or settle
any claim for which the Indemnifying Party may be
required to indemnify it except with the prior
written consent of the Indemnifying Party, which
shall not be unreasonably withheld.
6
<PAGE> 7
8. Certain Covenants of IFTC and Fund.
----------------------------------
A. All requisite steps will be taken by Fund from
time to time when and as necessary to register
the Fund's shares for sale in all states in which
Fund's shares shall at the time be offered for
sale and require registration. If at any time
Fund receives notice of any stop order or other
proceeding in any such state affecting such
registration or the sale of Fund's shares, or of
any stop order or other proceeding under the
Federal securities laws affecting the sale of
Fund's shares, Fund will give prompt notice
thereof to IFTC.
B. IFTC hereby agrees to establish and maintain
facilities and procedures reasonably acceptable
to Fund for safekeeping of share certificates,
check forms, and facsimile signature imprinting
devices, if any; and for the preparation or use,
and for keeping account of, such certificates,
forms and devices. Further, IFTC agrees to carry
insurance, as specified in Exhibit B hereto, with
insurers reasonably acceptable to Fund and in
minimum amounts that are reasonably acceptable to
Fund, which will not be changed without the
consent of Fund, which consent shall not be
unreasonably withheld, and which will be expanded
in coverage or increased in amounts from time to
time if and when reasonably requested by Fund.
If IFTC determines that it is unable to obtain
any such insurance upon commercially reasonable
terms, it shall promptly so advise Fund in
writing. In such event, Fund shall have the
right to terminate this Agreement upon 30 days
notice.
C. To the extent required by Section 31 of the
Investment Company Act of 1940 and Rules
thereunder, IFTC agrees that all records
maintained by IFTC relating to the services to be
performed by IFTC under this Agreement are the
property of Fund and will be preserved and will
be surrendered promptly to Fund on request.
D. IFTC agrees to furnish Fund semi-annual reports
of its financial condition, consisting of a
balance sheet, earnings statement and any other
reasonably available financial information
reasonably requested by Fund. The annual
7
<PAGE> 8
financial statements will be certified by IFTC's
certified public accountants.
E. IFTC represents and agrees that it will use all
reasonable efforts to keep current on the trends
of the investment company industry relating to
shareholder services and will use all reasonable
efforts to continue to modernize and improve its
system without additional cost to Fund.
F. IFTC will permit Fund and its authorized
representatives to make periodic inspections of
its operations at reasonable times during
business hours.
G. If IFTC is prevented from complying, either
totally or in part, with any of the terms or
provisions of this Agreement, by reason of fire,
flood, storm, strike, lockout or other labor
trouble, riot, war, rebellion, accidents, acts of
God, equipment, utility or transmission failure
or damage, and/or any other cause or casualty
beyond the reasonable control of IFTC, whether
similar to the foregoing matters or not, then
upon written notice to Fund, the requirements of
this Agreement that are affected by such
disability, to the extent so affected, shall be
suspended during the period of such disability;
provided, however, that IFTC shall make
reasonable effort to remove such disability as
soon as possible. During such period, Fund may
seek alternate sources of service without
liability hereunder; and IFTC will use all
reasonable efforts to assist Fund to obtain
alternate sources of service. IFTC shall have no
liability to Fund for nonperformance because of
the reasons set forth in this Section 8.G; but if
a disability that, in Fund's reasonable belief,
materially affects IFTC's ability to perform its
obligations under this Agreement continues for a
period of 30 days, then Fund shall have the right
to terminate this Agreement upon 10 days written
notice to IFTC.
9. Adjustment.
----------
In case of any recapitalization, readjustment or
other change in the structure of Fund requiring a
change in the form of share certificates, IFTC will
issue or register certificates in the new form in
exchange for, or in transfer of, the outstanding
8
<PAGE> 9
certificates in the old form, upon receiving the
following:
A. Written instructions from an officer of Fund.
B. Certified copy of any amendment to the Agreement
and Declaration of Trust or other document
effecting the change.
C. Certified copy of any order or consent of each
governmental or regulatory authority required by
law for the issuance of the shares in the new
form, and an opinion of counsel that no order or
consent of any other government or regulatory
authority is required.
D. Specimens of the new certificates in the form
approved by the Board of Trustees of Fund, with a
certificate of the Secretary of Fund as to such
approval.
E. Opinion of counsel for Fund:
(1) With respect to the status of the shares of
Fund in the new form under the Securities Act
of 1933, and any other applicable federal or
state laws.
(2) To the effect that the issued shares in the
new form are, and all unissued shares will be
when issued, validly issued, fully paid and
non-assessable.
10. Share Certificates.
------------------
Fund will furnish IFTC with a sufficient supply of
blank share certificates and from time to time will
renew such supply upon the request of IFTC. Such
certificates will be signed manually or by facsimile
signatures of the officers of Fund authorized by law
and Fund's Bylaws to sign share certificates and, if
required, will bear the trust seal or facsimile
thereof.
11. Death, Resignation or Removal of Signing Officer.
------------------------------------------------
Fund will file promptly with IFTC written notice of
any change in the officers authorized to sign share
certificates, written instructions or requests,
together with two signature cards bearing the
9
<PAGE> 10
specimen signature of each newly authorized officer,
all as certified by an appropriate officer of the
Fund. In case any officer of Fund who will have
signed manually or whose facsimile signature will
have been affixed to blank share certificates will
die, resign, or be removed prior to the issuance of
such certificates, IFTC may issue or register such
share certificates as the share certificates of Fund
notwithstanding such death, resignation, or removal,
until specifically directed to the contrary by Fund
in writing. In the absence of such direction, Fund
will file promptly with IFTC such approval, adoption,
or ratification as may be required by law.
12. Future Amendments of Agreement and Declaration of
-------------------------------------------------
Trust and Bylaws.
------------------
Fund will promptly file with IFTC copies of all
material amendments to its Agreement and Declaration
of Trust and Bylaws and Registration Statement made
after the date of this Agreement.
13. Instructions, Opinion of Counsel and Signatures.
-----------------------------------------------
At any time IFTC may apply to any officer of Fund for
instructions, and may consult with legal counsel for
Fund at the expense of Fund, or with its own legal
counsel at its own expense, with respect to any
matter arising in connection with the agency; and it
will not be liable for any action taken or omitted by
it in good faith in reliance upon such instructions
or upon the opinion of such counsel. IFTC is
authorized to act on the orders, directions or
instructions of such persons as the Board of Trustees
of Fund shall from time to time designate by
resolution. IFTC will be protected in acting upon
any paper or document, including any orders,
directions or instructions, reasonably believed by it
to be genuine and to have been signed by the proper
person or persons; and IFTC will not be held to have
notice of any change of authority of any person so
authorized by Fund until receipt of written notice
thereof from Fund. IFTC will also be protected in
recognizing share certificates that it reasonably
believes to bear the proper manual or facsimile
signatures of the officers of Fund, and the proper
countersignature of any former Transfer Agent or
Registrar, or of a Co-Transfer Agent or Co-Registrar.
10
<PAGE> 11
14. Papers Subject to Approval of Counsel.
-------------------------------------
The acceptance by IFTC of its appointment as Transfer
Agent and Dividend Disbursing Agent, and all
documents filed in connection with such appointment
and thereafter in connection with the agencies, will
be subject to the approval of legal counsel for IFTC,
which approval will not be unreasonably withheld.
15. Certification of Documents.
--------------------------
The required copy of the Agreement and Declaration of
Trust of Fund and copies of all amendments thereto
will be certified by the appropriate official of The
Commonwealth of Massachusetts; and if such Agreement
and Declaration of Trust and amendments are required
by law to be also filed with a county, city or other
officer or official body, a certificate of such
filing will appear on the certified copy submitted to
IFTC. A copy of the order or consent of each
governmental or regulatory authority required by law
for the issuance of Fund shares will be certified by
the Secretary or Clerk of such governmental or
regulatory authority, under proper seal of such
authority. The copy of the Bylaws and copies of all
amendments thereto and copies of resolutions of the
Board of Trustees of Fund will be certified by the
Secretary or an Assistant Secretary of Fund.
16. Records.
-------
IFTC will maintain customary records in connection
with its agency, and particularly will maintain those
records required to be maintained pursuant to sub-
paragraph (2)(iv) of paragraph (b) of Rule 31a-1
under the Investment Company Act of 1940, if any.
17. Disposition of Books, Records and Cancelled
-------------------------------------------
Certificates.
--------------
IFTC will send periodically to Fund, or to where
designated by the Secretary or an Assistant Secretary
of Fund, all books, documents, and all records no
longer deemed needed for current purposes and share
certificates which have been cancelled in transfer or
in exchange, upon the understanding that such books,
documents, records, and share certificates will not
11
<PAGE> 12
be destroyed by Fund without the consent of IFTC
(which consent will not be unreasonably withheld),
but will be safely stored for possible future
reference.
18. Provisions Relating to IFTC as Transfer Agent.
---------------------------------------------
A. IFTC will make original issues of share
certificates upon written request of an officer
of Fund and upon being furnished with a certified
copy of a resolution of the Board of Trustees
authorizing such original issue, an opinion of
counsel as outlined in Section 1.G or 9.E of this
Agreement, the certificates required by Section
10 of this Agreement and any other documents
required by Section 1 or 9 of this Agreement.
B. Before making any original issue of certificates,
Fund will furnish IFTC with sufficient funds to
pay any taxes required on the original issue of
the shares. Fund will furnish IFTC such evidence
as may be required by IFTC to show the actual
value of the shares. If no taxes are payable,
IFTC will upon request be furnished with an
opinion of outside counsel to that effect.
C. Shares will be transferred and new certificates
issued in transfer, or shares accepted for
redemption and funds remitted therefor, upon
surrender of the old certificates in form deemed
by IFTC properly endorsed for transfer or
redemption accompanied by such documents as IFTC
may deem necessary to evidence the authority of
the person making the transfer or redemption, and
bearing satisfactory evidence of the payment of
any applicable share transfer taxes. IFTC
reserves the right to refuse to transfer or
redeem shares until it is satisfied that the
endorsement or signature on the certificate or
any other document is valid and genuine, and for
that purpose it may require a guarantee of
signature by such persons as may from time to
time be specified in the prospectus related to
such shares or otherwise authorized by Fund.
IFTC also reserves the right to refuse to
transfer or redeem shares until it is satisfied
that the requested transfer or redemption is
legally authorized, and it will incur no
liability for the refusal in good faith to make
transfers or redemptions which, in its judgment,
are improper, unauthorized, or otherwise not
12
<PAGE> 13
rightful. IFTC may, in effecting transfers or
redemptions, rely upon Simplification Acts or
other statutes which protect it and Fund in not
requiring complete fiduciary documentation.
D. When mail is used for delivery of share
certificates, IFTC will forward share
certificates in "nonnegotiable" form as provided
by Fund by first class mail, all such mail
deliveries to be covered while in transit to the
addressee by insurance arranged for by IFTC.
E. IFTC will issue and mail subscription warrants
and certificates provided by Fund and
representing share dividends, exchanges or split-
ups, or act as Conversion Agent upon receiving
written instructions from any officer of Fund and
such other documents as IFTC deems necessary.
F. IFTC will issue, transfer, and split-up
certificates upon receiving written instructions
from an officer of Fund and such other documents
as IFTC may deem necessary.
G. IFTC may issue new certificates in place of
certificates represented to have been lost,
destroyed, stolen or otherwise wrongfully taken,
upon receiving indemnity satisfactory to IFTC,
and may issue new certificates in exchange for,
and upon surrender of, mutilated certificates.
Any such issuance shall be in accordance with the
provisions of law governing such matter and any
procedures adopted by the Board of Trustees of
the Fund of which IFTC has notice.
H. IFTC will supply a shareholder's list to Fund
properly certified by an officer of IFTC for any
shareholder meeting upon receiving a request from
an officer of Fund. It will also supply lists at
such other times as may be reasonably requested
by an officer of Fund.
I. Upon receipt of written instructions of an
officer of Fund, IFTC will address and mail
notices to shareholders.
J. In case of any request or demand for the
inspection of the share books of Fund or any
other books of Fund in the possession of IFTC,
IFTC will endeavor to notify Fund and to secure
instructions as to permitting or refusing such
inspection. IFTC reserves the right, however, to
13
<PAGE> 14
exhibit the share books or other books to any
person in case it is advised by its counsel that
it may be held responsible for the failure to
exhibit the share books or other books to such
person.
19. Provisions Relating to Dividend Disbursing Agency.
-------------------------------------------------
A. IFTC will, at the expense of Fund, provide a
special form of check containing the imprint of
any device or other matter desired by Fund. Said
checks must, however, be of a form and size
convenient for use by IFTC.
B. If Fund wants to include additional printed
matter, financial statements, etc., with the
dividend checks, the same will be furnished to
IFTC within a reasonable time prior to the date
of mailing of the dividend checks, at the expense
of Fund.
C. If Fund wants its distributions mailed in any
special form of envelopes, sufficient supply of
the same will be furnished to IFTC but the size
and form of said envelopes will be subject to the
approval of IFTC. If stamped envelopes are used,
they must be furnished by Fund; or, if postage
stamps are to be affixed to the envelopes, the
stamps or the cash necessary for such stamps must
be furnished by Fund.
D. IFTC will maintain one or more deposit accounts
as Agent for Fund, into which the funds for
payment of dividends, distributions, redemptions
or other disbursements provided for hereunder
will be deposited, and against which checks will
be drawn.
20. Termination of Agreement.
------------------------
A. This Agreement may be terminated by either party
upon sixty (60) days prior written notice to the
other party.
B. Fund, in addition to any other rights and
remedies, shall have the right to terminate this
Agreement forthwith upon the occurrence at any
time of any of the following events:
14
<PAGE> 15
(1) Any interruption or cessation of operations
by IFTC or its assigns which materially
interferes with the business operation of
Fund.
(2) The bankruptcy of IFTC or its assigns or the
appointment of a receiver for IFTC or its
assigns.
(3) Any merger, consolidation or sale of
substantially all the assets of IFTC or its
assigns.
(4) The acquisition of a controlling interest in
IFTC or its assigns, by any broker, dealer,
investment adviser or investment company
except as may presently exist.
(5) Failure by IFTC or its assigns to perform its
duties in accordance with this Agreement,
which failure materially adversely affects
the business operations of Fund and which
failure continues for thirty (30) days after
written notice from Fund.
(6) The registration of IFTC or its assigns as a
transfer agent under the Securities Exchange
Act of 1934 is revoked, terminated or
suspended for any reason.
C. In the event of termination, Fund will promptly
pay IFTC all amounts due to IFTC hereunder. Upon
termination of this Agreement, IFTC shall deliver
all shareholder and account records pertaining to
Fund either to Fund or as directed in writing by
Fund.
21. Assignment.
----------
A. Except for the assignment of responsibilities
pursuant to the Services Agreement ("Services
Agreement") between IFTC and Kemper Service
Company ("KSVC"), which Fund has approved,
neither this Agreement nor any rights or
obligations hereunder may be assigned by IFTC
without the written consent of Fund; provided,
however, no assignment will relieve IFTC of any
of its obligations hereunder.
B. This Agreement including, without limitation, the
provisions of Section 7 will inure to the benefit
15
<PAGE> 16
of and be binding upon the parties and their
respective successors and assigns including KSVC
pursuant to the aforesaid Services Agreement.
C. KSVC is authorized by Fund to use the system
services of DST Systems, Inc.
22. Confidentiality.
---------------
A. Except as provided in the last sentence of
Section 18.J hereof, or as otherwise required by
law, IFTC will keep confidential all records of
and information in its possession relating to
Fund or its shareholders or shareholder accounts
and will not disclose the same to any person
except at the request or with the consent of
Fund.
B. Except as otherwise required by law, Fund will
keep confidential all financial statements and
other financial records (other than statements
and records relating solely to Fund's business
dealings with IFTC) and all manuals, systems and
other technical information and data, not
publicly disclosed, relating to IFTC's operations
and programs furnished to it by IFTC pursuant to
this Agreement and will not disclose the same to
any person except at the request or with the
consent of IFTC. Notwithstanding anything to the
contrary in this Section 22.B, if an attempt is
made pursuant to subpoena or other legal process
to require Fund to disclose or produce any of the
aforementioned manuals, systems or other
technical information and data, Fund shall give
IFTC prompt notice thereof prior to disclosure or
production so that IFTC may, at its expense,
resist such attempt.
23. Survival of Representations and Warranties.
------------------------------------------
All representations and warranties by either party
herein contained will survive the execution and
delivery of this Agreement.
24. Miscellaneous.
-------------
A. This Agreement is executed and delivered in the
State of Illinois and shall be governed by the
laws of said state (except as to Section 24.G
16
<PAGE> 17
hereof which shall be governed by the laws of The
Commonwealth of Massachusetts).
B. No provisions of this Agreement may be amended or
modified in any manner except by a written
agreement properly authorized and executed by
both parties hereto.
C. 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.
D. This Agreement shall become effective as of the
date hereof.
E. 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.
F. If any part, term or provision of this Agreement
is held by the courts to be illegal, in conflict
with any law or otherwise invalid, the remaining
portion or portions shall be considered severable
and not be affected, and the rights and
obligations of the parties shall be construed and
enforced as if the Agreement did not contain the
particular part, term or provision held to be
illegal or invalid.
G. All parties hereto are expressly put on notice of
Fund's Agreement and Declaration of Trust which
is on file with the Secretary of The Commonwealth
of Massachusetts, and the limitation of
shareholder and trustee liability contained
therein. This Agreement has been executed by and
on behalf of Fund by its representatives as such
representatives and not individually, and the
obligations of Fund hereunder are not binding
upon any of the Trustees, officers or
shareholders of the Fund individually but are
binding upon only the assets and property of
Fund. With respect to any claim by IFTC for
recovery of that portion of the compensation and
expenses (or any other liability of Fund arising
hereunder) allocated to a particular Portfolio,
whether in accordance with the express terms
hereof or otherwise, IFTC shall have recourse
solely against the assets of that Portfolio to
satisfy such claim and shall have no recourse
17
<PAGE> 18
against the assets of any other Portfolio for
such purpose.
H. This Agreement, together with the Fee Schedule,
is the entire contract between the parties
relating to the subject matter hereof and
supersedes all prior agreements between the
parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective duly authorized officer as of
the day and year first set forth above.
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
By /s/ Gerald M. Cole
---------------------------------
Title: Vice President
ATTEST:
/s/ Philip J. Collora
-----------------------------
Title: Vice President & Asst. Secretary
INVESTORS FIDUCIARY TRUST COMPANY
By /s/ G.J. Wingerter
---------------------------------
Title: Executive Vice President
ATTEST:
/s/ Cheryl Naegler
----------------------------
Title: Asst. Secretary
18
<PAGE> 19
EXHIBIT A
---------
FEE SCHEDULE
------------
<TABLE>
<CAPTION>
Transfer Agency Function Fee Payable by Fund
------------------------ -------------------
<S> <C>
1. Maintenance of open shareholder $13.00 per year per
account. account
2. Maintenance of closed shareholder $6.00 per year per
account. account
3. Disaster recovery fee. $.40 per year per
open and closed
account.
</TABLE>
The out-of-pocket expenses of IFTC will be reimbursed by Fund
in accordance with the provisions of paragraph 5 of the
Agency Agreement.
As reflected in Section 21 of the Agency Agreement, the
responsibilities of IFTC under the Agency Agreement have been
assigned to Kemper Service Company ("KSVC"). KSVC will, from
time to time, enter into Omnibus Account Services Agreements
("Omnibus Agreements") with one or more financial services
firms ("Firms") that will maintain shares of the Fund owned
by their clients ("client-shareholders") in one or more
"street-name" or "omnibus" accounts ("omnibus accounts") on
the books of KSVC and will provide recordkeeping and other
services with respect to the accounts of such client-
shareholders. For services provided under the Omnibus
Agreements, KSVC will provide compensation to the Firms. For
purposes of determining the fees payable by the Fund to IFTC
under the Agency Agreement relating to such omnibus accounts,
the fees noted above for maintenance of open and closed
shareholder accounts (but not for disaster recovery) will be
based upon the number of client shareholder accounts on the
records of the Firms maintaining shares in such omnibus
accounts.
<PAGE> 20
EXHIBIT B
---------
IFTC INSURANCE COVERAGE
-----------------------
DESCRIPTION OF POLICY:
Brokers Blanket Bond, Standard Form 14
Covering losses caused by dishonesty of employees,
physical loss of securities on or outside of premises
while in possession of authorized person, loss caused
by forgery or alteration of checks or similar
instruments.
Errors and Omissions Insurance
Covering replacement of destroyed records and
computer errors and omissions.
Special Forgery Bond
Covering losses through forgery or alteration of
checks or drafts of customers processed by insured
but drawn on or against them.
Mail Insurance (applies to all full service operations)
Provides indemnity for the following types of
securities lost in the mails:
Non-negotiable securities mailed to domestic
locations via registered mail.
Non-negotiable securities mailed to domestic
locations via first-class or certified mail.
Non-negotiable securities mailed to foreign
locations via registered mail.
Negotiable securities mailed to all locations via
registered mail.
<PAGE> 1
EXHIBIT 99.B11
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors and Reports to Shareholders" and to the
use of our report dated November 14, 1995 in the Registration Statement (Form
N-1A) and its incorporation by reference in the related Prospectus of
Tax-Exempt California Money Market Fund, filed with the Securities and Exchange
Commission in this Post-Effective Amendment No. 9 to the Registration Statement
under the Securities Act of 1933 (File No. 33-12938) and in this Amendment No.
10 to the Registration Statement under the Investment Company Act of 1940 (File
No. 811-5076).
/S/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
January 18, 1996
<PAGE> 2
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders
Tax-Exempt California Money Market Fund
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Tax-Exempt California Money Market Fund as of
September 30, 1995, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the fiscal periods since 1987.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of investments
owned as of September 30, 1995, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Tax-Exempt California Money Market Fund at September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the fiscal periods since 1987, in conformity with generally accepted
accounting principles.
/S/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
November 14, 1995
<PAGE> 1
EXHIBIT 99.B16
EXHIBIT OF PERFORMANCE CALCULATIONS
This exhibit reflects the calculation of certain performance figures
that appear under "Performance" in the Part B Statement of Additional
Information ("Part B") of Tax-Exempt California Money Market Fund
(the "Fund").
1. Formula. The Fund's current yield quotation is based on a seven-day
period and is calculated as follows. The first calculation is net
investment income per share, which is accrued interest on portfolio
securities, plus or minus amortized discount or premium (excluding market
discount), less accrued expenses. This number is then divided by the price
per share (expected to remain constant at $1.00) at the beginning of the
period ("base period return"). The result is then divided by 7 and
multiplied by 365 and the resulting yield figure is carried to the nearest
one-hundredth of one percent. Realized capital gains or losses and
unrealized appreciation or depreciation of investments are not included in
the calculation.
The Fund's effective yield is determined by taking the base period return
(calculated as described above) and calculating the effect of assumed
compounding. The formula for the effective yield is:
365/7
(base period return + 1) - 1.
The tax equivalent yield of the Fund is computed by dividing that portion
of the Fund's yield (calculated as described above) which is tax-exempt by
(one minus the stated income tax rate) and adding the result to that
portion, if any, of the yield of the Fund that is not tax-exempt.
2. Performance Reflected. The representative yield calculations reflected
herein are for the seven-day period ended September 30, 1988.
3. Yield. First, net investment income per share for the last day of the
seven-day period is calculated. The following figures are provided for
this purpose:
a. Accrued interest, including amortization of premium and discount, for
September 30, 1988 equals $20,107.63.
b. Accrued expenses for September 30, 1988 equal $2,367.00.
c. The number of outstanding shares of record for dividend purposes on
September 30, 1988 equals 128,953,145.06.
<PAGE> 2
Net investment income per share for September 30, 1988 is then calculated
as follows:
Accrued Interest-Accrued Expenses
Net Investment Income Per Share = ---------------------------------
Record Date Shares
$20,107.63 - $2,367.00
---------------------- = $.000137574/Share
128,953,145.06
Net investment income for the other six days in the seven-day period is
then calculated in the same manner. The resulting figures for each of the
seven days in the period are added together to obtain the net investment
income per share for the period as follows:
<TABLE>
<CAPTION>
Net Investment
Date Income Per Share
---- ----------------
<S> <C>
September 30, 1988 $.000137574/Share
September 29, 1988 .000140796
September 28, 1988 .000139765
September 27, 1988 .000138303
September 26, 1988 .000138590
September 25, 1988 .000140777
September 24, 1988 .000140777
-----------
TOTAL $.000976582/Share
</TABLE>
Then, base period return is calculated.
Net Investment Income Per Share
Base Period Return = -------------------------------
Price Per Share
$.000976582/Share
----------------- = .000976582
$1.00/Share
Then, yield is calculated.
Base Period Return
Yield = ------------------ X 365
7
.000976582
= ---------- X 365 = .0509
7
<PAGE> 3
The decimal return is converted to a percentage by multiplying by 100.
.0509 X 100 = 5.09%
4. Effective Yield. The base period return for use in the formula for
effective yield set forth in Sub-section 1 above is the same as calculated
in Sub-section 3 above.
365/7
Effective Yield = (Base Period Return + 1) - 1
365/7
= (.000976582 + 1) - 1
365/7
= (1.00976852) - 1
= 1.0522 - 1
= .0522
The decimal return is converted to a percentage by multiplying by 100.
.0522 X 100 = 5.22%
5. Tax Equivalent Yield. Tax equivalent yield is reflected in the Part B
assuming a maximum combined federal and State of California income tax rate
of 39.2%. Using the Fund's yield as calculated in Sub-section 3 above,
100% of which is tax-exempt, the tax equivalent yield of the Fund is
calculated as follows:
5.09%
Tax Equivalent Yield = --------------
[1 - tax rate]
= 5.09%
----------
[1 - .392]
5.09%
= -----
.608
= 8.37%
<PAGE> 4
Based upon the maximum federal income tax rate of 33%, the Fund's tax
equivalent yield is calculated as follows:
5.09%
Tax Equivalent Yield = --------------
[1 - tax rate]
= 5.09%
----------
[1 - .33]
5.09%
= -----
.67
= 7.60%
<PAGE> 1
EXHIBIT 99.B24
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Tax-
Exempt California Money Market Fund.
Signature Title Date
--------- ----- ----
/s/ Stephen B. Timbers Trustee October 12, 1995
---------------------------
<PAGE> 2
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Tax-
Exempt California Money Market Fund.
Signature Title Date
--------- ----- ----
/s/ David W. Belin Trustee October 12, 1995
--------------------------
<PAGE> 3
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Tax-
Exempt California Money Market Fund.
Signature Title Date
--------- ----- ----
/s/ Lewis A. Burnham Trustee October 12, 1995
--------------------------
<PAGE> 4
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Tax-
Exempt California Money Market Fund.
Signature Title Date
--------- ----- ----
/s/ Donald L. Dunaway Trustee October 12, 1995
--------------------------
<PAGE> 5
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Tax-
Exempt California Money Market Fund.
Signature Title Date
--------- ----- ----
/s/ Robert B. Hoffman Trustee October 12, 1995
--------------------------
<PAGE> 6
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Tax-
Exempt California Money Market Fund.
Signature Title Date
--------- ----- ----
/s/ Donald R. Jones Trustee October 12, 1995
--------------------------
<PAGE> 7
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Tax-
Exempt California Money Market Fund.
Signature Title Date
--------- ----- ----
/s/ Shirley D. Peterson Trustee October 12, 1995
--------------------------
<PAGE> 8
POWER OF ATTORNEY
-----------------
The person whose signature appears below hereby appoints
Charles F. Custer, Stephen B. Timbers and Philip J. Collora
and each of them, any of whom may act without the joinder of
the others, as such person's attorney-in-fact to sign and
file on such person's behalf individually and in the capacity
stated below such registration statements, amendments,
post-effective amendments, exhibits, applications and other
documents with the Securities and Exchange Commission or any
other regulatory authority as may be desirable or necessary
in connection with the public offering of shares of Tax-
Exempt California Money Market Fund.
Signature Title Date
--------- ----- ----
/s/ William P. Sommers Trustee October 12, 1995
--------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1995
ANNUAL REPORT TO SHAREHOLDERS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<CIK> 0000811911
<NAME> TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 104,135
<INVESTMENTS-AT-VALUE> 104,135
<RECEIVABLES> 486
<ASSETS-OTHER> 1,013
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 105,634
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 342
<TOTAL-LIABILITIES> 342
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 105,292
<SHARES-COMMON-STOCK> 105,292
<SHARES-COMMON-PRIOR> 101,148
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 105,292
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,851
<OTHER-INCOME> 0
<EXPENSES-NET> (736)
<NET-INVESTMENT-INCOME> 3,115
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,115)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 382,622
<NUMBER-OF-SHARES-REDEEMED> (381,543)
<SHARES-REINVESTED> 3,065
<NET-CHANGE-IN-ASSETS> 4,144
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> (217)
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> (736)
<AVERAGE-NET-ASSETS> 98,454
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (.03)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .008
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE> 1
EXHIBIT-99.485(b)
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
January 19, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Tax-Exempt California Money Market Fund
To The Commission:
We are counsel to the above-referenced investment company (the
"Fund") and as such have participated in the preparation and review of
Post-Effective Amendment No. 9 to the Fund's registration statement being filed
pursuant to Rule 485(b) under the Securities Act of 1933. In accordance with
paragraph (b)(4) of Rule 485 and in reliance upon the oral approval of the
staff of the Commission, acting on behalf of the Commission, under Rule
485(b)(1)(ix) for certain of the disclosures to be contained in the amendment,
we hereby represent that such amendment does not contain disclosures that would
render it ineligible to become effective pursuant to paragraph (b) thereof.
Very truly yours,
/s/Vedder, Price, Kaufman & Kammaholz
VEDDER, PRICE, KAUFMAN & KAMMHOLZ
COK:cj
